July 4th, 2012

Central bank decision not to pass on transaction tax to commercial lenders could produce loss, warns Rogán


The National Bank of Hungary’s decision not to pass on the proposed financial transactions tax to its clients will be the reason behind any losses it makes, Antal Rogan, parliamentary group leader of the ruling Fidesz party, told commercial TV2 on Tuesday. Hungary’s parliament voted late on Monday change the bill so as to extend the financial transactions tax to include the central bank as well as the treasury.

“I am not sure that the governor is right, but central bank is independent, so we will not criticise his decision,” Rogan said, referring to remarks made by central bank governor Andras Simor’s remarks on Monday.

Calling the proposed duty “illegal, dangerous and unintelligible”, Simor said that if the bank were to pass on the tax this would amount to a base-rate cut. He added that central bank would make a loss of 100 billion forints (EUR 350m) in 2013, which the budget would have to compensate for in 2014; this is why he considered the move irrational.

Rogan said it was premature to say whether or not the central bank would make a loss, and if so by how much.

If commercial banks must pay the duty then it would be hard to explain why the central bank should be an exception, he said.

Simor should have taken into account that his refusal to pass on the costs of the tax would cover all its clients, including speculators, Rogan said, adding that Simor might have considered excluding some types of client from the central bank’s exemption.

Prime Minister Viktor Orban on Monday announced plans to cut taxes and red tape for small companies and for employers who take on under-25s, seniors or unskilled workers. The 300-billion-forint plan would be largely financed from the transactions tax.

Rogan said he expected the European Central Bank to raise objections to the new tax, just as they had done with the banking tax. He added that the subject of the tax is likely to come up also at pending talks with the International Monetary Fund on financial aid.


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