Hungarian Shares Dive Most in 2 Months on Taxes: Budapest MoverAndras Gergely
OTP Bank Nyrt. and Magyar Telekom Nyrt. led the biggest fall in Hungary’s benchmark index in almost two months after the government proposed raising taxes on financial transactions, telecommunications and mining.
Shares in OTP, Hungary’s largest lender, slid 1.5 percent to 4,873 forint. Magyar Telekom, the Hungarian unit of Deutsche Telekom AG, declined 4.7 percent to 343 forint by the close in Budapest, the steepest drop since May 8. The BUX index lost 1.3 percent to 19,276.74, slipping the most since April 22.
The tax-increase measures are needed to ensure Hungary continues to meet its budget deficit goals stipulated by the European Union, Economy Minister Mihaly Varga told reporters today. Last month, the European Commission recommended releasing Hungary from a budget monitoring process that’s been in place since the country joined the bloc in 2004 as Prime Minister Viktor Orban cut the deficit to below the EU’s 3 percent of gross domestic product limit.
“The market was caught by surprise that a further austerity package was needed even after the European Commission recommendation to lift the excessive deficit procedure against Hungary,” Akos Kuti, Budapest-based head of research at broker Equilor Befektetesi Zrt., wrote in an e-mailed report.
The forint appreciated 0.2 percent to 290.25 per euro.
Orban cut the budget shortfall by levying special taxes on industries including banking, telecommunications and energy.
The Cabinet plans to increase a tax on financial transactions such as withdrawals from automated teller machines and bank transfers and a separate levy on phone calls and text messages, Varga said. The government needs additional revenue sources as inflation has fallen to the lowest level since 1974, he said.
Banks will also be required to make a payment equivalent to 7 percent of loans that the central government transfered to its books from debt-laden municipalities in December, according to a draft bill posted on Parliament’s website today.
“That is like a one-off special tax which may weigh significantly on the banking sector,” the Budapest-based broker unit of KBC Groep NV wrote in an e-mailed report today.