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Hungary government plans more transaction taxes

The Hungarian government plans to include the central bank and Treasury in a proposed new transaction tax to fund cuts in social security levies worth 300 billion forints ($1.3 billion) in the run-up to next year's election.

The new tax on financial transactions, to take effect from 2013, is a mainstay of "unorthodox" efforts by right-wing Prime Minister Viktor Orbán's government to rein in a chronic budget deficit while the economy slows.
The move comes a day after the International Monetary Fund approved Hungary's proposed changes to its disputed central bank law, opening the door to talks on financial aid to avert a market crisis.
In an amendment submitted by parliament's budget committee, lawmakers proposed that the scope of the tax should be widened.
The changes would also set an upper cost limit of 6,000 forints on individual bank transactions as part of a compromise with commercial banks, who have said the lack of a cost limit could drive major players abroad.
Banks have criticised the new tax as a "slap in the face", the latest in a string of unconventional measures hitting the financial sector, and said the burden would hurt lending and slow recovery.
Economy Minister György Matolcsy, architect of the new fiscal policies, was cited by state owned news agency MTI as saying that the government agreed with banks to halve its 280 billion forints revenue target from the financial transaction tax for 2013.
It would also generate 60 billion forints - about half this year's revenue target - through a special bank tax, he said.
He said the government would use 100 billion forints of reserves set aside in the draft 2013 budget to fund the job-related tax cut programme. A further 100 billion would come from taxes levied on central bank transactions and the final 100 billion from transaction tax on the Hungary's Treasury.
Antal Rogán, head of the ruling Fidesz' parliamentary group, was quoted by MTI as saying the programme would involve lower taxes paid on behalf of workers below the age of 25 and above 55, unskilled workers and firms with fewer than 25 employees.
He said the tax cuts must not jeopardise the country's 2.2 percent of GDP budget deficit target, one of the lowest in the European Union, for next year.
According to a copy of the proposed changes to the transaction tax posted on parliament's website, various transactions would be taxed at a rate of 0.1 percent but the levy could not exceed 6,000 forints per transaction.
The tax would also be taken, without an upper limit, on some transactions by the Treasury and the National Bank of Hungary.
It was not clear from the proposal whether the tax would be paid by the central bank or its counterparties or whether it would change the total amount of budgetary revenue targeted. The Central Bank and the Hungarian Bank Association could not immediately comment.
Source: Reuters

Last Updated on Friday, 30 August 2013 09:11



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