June 19th, 2012
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Fidesz stalwarts warn on transaction tax

szeles-grim

The tax on financial transactions being introduced by the Hungarian government has come in for some withering criticism from some unlikely quarters: Right-wing industrialist and media tycoon Gábor Széles (right), and Mihály Varga, the government’s chief negotiator with the IMF, who previously served as finance minister in the first Fidesz government, and more recently as Prime Minister Viktor Orbán’s chief of staff.

In a piece yesterday in the otherwise reliably government-friendly Magyar Hírlap – which is owned by Széles – the two men were quoted as pointing to shortcoming with the levy, which was put in place to compensate for a decline in revenue from the phasing out of the “crisis” tax on the country’s banks. Yesterday it was revealed that the government expects revenue of HUF 283 billion from the tax next year, and an annual HUF 322 billion in 2014-2016, much more than earlier anticipated.

Széles, who is also honorary chairman of the National Association of Employers and Industrialist, said the tax will not only harm local companies but will also scare away potential investors and prompt banks to disinvest. According to Széles, Hungarian companies could be prompted to go abroad to do their banking.

Varga echoed this sentiment, saying the threat that companies with internal cash flows will move their bank transfers outside Hungary is a real one, which could be compounded by the imminent introduction of the Single Euro Payments Area initiative on July 1, which simplifies bank transfers within the European Union.

“It would be unfortunate, if businesses were to move their cash transfers outside Hungary, therefore the government must address this problem and find a way to keep cash flows within the country,” the paper quoted Varga as saying.

Varga added that the tax has not yet been passed into law, so there is a chance that the government will respond to these questions in the right way.

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  • Observation

    Ooooooh, I bet Victoria is cranky today!

  • Notifier

    Transaction tax is illogical for Hungary or EU.

    Proposed EU FTT

    Even Before the Damaging Relocation Effects: UK’s European Scrutiny Committee citing the EU Commission’s FTT Impact Assessment , “a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs.”

    UK’s Economic Sub-Committee of the House of Lords, “The FTT is likely to induce a loss in GDP between five and 20 times larger than the revenues raised from the tax.”

    Sweden’s short-lived FTT raised 3 percent of projected revenues, not enough to cover the cost of collecting the tax.

  • Democrat

    Is Varga trying to send a message to his bosses in advance of the discussions with the IMF? If this ridiculous tax becomes a sticking point dear Mr M is really going to have an unfathomably deep black hole.

  • Abácsi

    A decline in government revenue should be handled by reducing government spending. Politicians can dream up new taxes and methods to take in more money. They forget whose money it is when they distribute it to keep themselves in power. The whole lot of them.

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