The Hungarian parliament approved on Thursday evening the introduction of a temporary tax on banks that is intended to help reduce the enormous deficit in this year’s state budget.
Under the new regulations, banks will have to pay 0.5 percent tax on the total balance sheet value above 50 billion forints, and 0.15 percent on the total balance sheet value below that threshold during a three-year period ending in 2011. Although most of the revenue from this tax will come from banks, it will also be paid by other financial companies, with insurance companies being taxed at a rate of 6.2 percent.
The new tax is expected to increase revenues flowing into the budget from the financial sector to 200 billion forints (909 million dollars) this year, up from the previous 13 billion, said Finance Minister Gyorgy Matolcsy. In the following year, the government intends to achieve approximately the same level of revenue, and the law allows for the application of this temporary tax as needed in 2012. Prime Minister Viktor Orban’s government requested the introduction of this tax, claiming it is the only way to achieve the targeted deficit of 3.8 percent of GDP, which the IMF and EU set as a condition for approving a 20 billion euro credit line in 2008. Before the parliamentary vote, Orban called the tax "necessary, fair, and effective."
It is unacceptable to "treat banks as sacred cows" in the conditions of a global crisis they initiated themselves, emphasized the Hungarian Prime Minister. The IMF and EU opposed the introduction of such a tax last weekend, arguing that it would harm the investment climate and stifle economic growth. A total of 301 representatives voted for the introduction of the new tax, 12 were against, and one abstained. (H)
