Mihály Varga, the Hungarian Minister of Economy, declared the government in taking into consideration the modification of the taxation system within the banking sector. At the 52nd Congress of the Hungarian Economic Association, the Minister, said amending the financial transaction tax and the special taxation rates applied to banks will most likely stimulate lending. These considerations come after the European Commission’s critics brought to the Hungarian bank tax. At that time, the Hungarian Minister of Economy said the tax was important for the country’s stabilization.
Prime Minister, Viktor Orban, declared the government’s plans on reducing the bank tax, which was the highest in the European Union until now. Tax cuts are planned for 2015 and 2016, but lower rates are hoped to be achieved in 2017 and 2018. No precise tax rate was given, but according to calculations the new tax applied to Hungarian financial companies would mean collecting 60 billion forints (190 million euros) compared to last year’s 144 billion forints collected from the same tax.
The main purpose is to align the Hungarian taxation of financial institutions to those of other EU member states. The tax is currently levied to foreign companies operating in Hungary in the energy, retail and telecommunication sectors. However, before opening a company, foreign investors may use the help of a Hungarian law firm that would explain all other facilities they can benefit from.
Hungarian subsidiaries of foreign banks have already been forced to back-up losses because of household debtors that could not pay mortgages on purchased properties, which is why Viktor Orban signed a memorandum with the European Bank for Reconstruction and Development’s president, Suma Chakrabarti, through which Hungary would buy 15% stake in the local unit of Erste Bank. The Prime Minister declared the deal was concluded on the condition that Erste Bank would invest more in the Hungarian economy. The transaction should be finalized within six months.
Considering the positive impact a lower tax should have on Hungarian companies, we will keep our readers informed about the new rates that haven’t been established yet, but also about the government’s deal with the EBRD.
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