Polish Opposition Mulls Scaling Down Planned Bank Tax

Updated on

Poland’s main opposition Law & Justice party is considering cutting back on its bank tax proposal to reduce the extra burden on lenders, which already face billions of zloty in additional costs from Swiss mortgage conversions.

Should the party win October elections as predicted by opinion polls, it may seek a new tax on between 0.25 percent to 0.32 percent of bank assets, down from an earlier discussed 0.39 percent rate, according to Konrad Raczkowski, Law & Justice’s tax policy adviser and a member of its program council. Banking stocks rose on Wednesday.

“We are still analyzing it and we see that the initially proposed rate could be painful for some banks,” Raczkowski told Bloomberg on Tuesday. “This is why we are considering a less-severe rate that wouldn’t tempt banks to avoid the tax.”

The Polish banking industry, in which foreign owners control 62 percent of assets, is at risk as lawmakers look for ways to pay for campaign promises in the next parliament. Banks are already being forced to bear almost all the all the cost of supporting mortgage holders hurt by the Swiss currency’s surge. Losses related to converting franc-denominated home loans may total about 21 billion zloty, according to the central bank.

Banking stocks jumped, led by Getin Noble Bank SA’s 5.1 percent gain and Bank Millennium SA’s 3.6 percent surge. PKO Bank Polski SA, the country’s largest lender, advanced 1.5 percent at 10:55 a.m. in Warsaw. Lenders have tumbled since Aug. 6, when parliament amended a bill to provide aid to Swiss-franc mortgage holders, doubling the costs for banks.

‘Improved’ Discourse

“The discourse regarding banks and new levies has slightly improved, hence such a share price reaction,” said Marcin Materna, the head of equity research at Bank Millennium in Warsaw. “Nevertheless, the main question is still why Polish banks are supposed to pay one of the highest taxes in Europe, even if the levy is lower than initially suggested.”

While Law & Justice analyzes the lower levy, the 0.39 percent rate remains its “base scenario,” PAP newswire cited the lawmaker Pawel Szalamacha as saying on Wednesday.

A levy at about 0.3 percent of assets would bring about 5 billion zloty ($1.33 billion) to the state budget, Raczkowski said, adding there are no obstacles to introducing the tax next year, although no final decision on the time has been made.

The party is also analyzing another option, taxing bank liabilities excluding deposits, Raczkowski said. Central Bank Governor Marek Belka has argued that such a tax wouldn’t penalize banks that gain the bulk of their funding through client deposits, which is regarded as a safer method of financing than short-term loans.

Swiss Woes

Concern that bank taxes will be increased have coupled with risk that banks will be forced to pay the bulk of currency conversion costs for as much as $38 billion in Swiss franc mortgages. A draft law on the issue envisages banks paying 90 percent of the costs of exchanging the home loans into zloty at the historic rate at which they were taken out in, with the remaining 10 percent paid for by borrowers.

Provisions for such a move would exceed the pretax profit in past 12 months at 11 banks with foreign-currency mortgages, accounting for 46 percent of the industry’s assets, the central bank said on Tuesday. The conversion may also cut corporate tax income by 2 billion zloty in the first year, it said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE