Lenders voice opposition to windfall tax

Banking

The Hungarian Banking Association warned that burdening the sector with a windfall tax could reduce lending activity in a statement issued on Friday, according to a report by state news wire MTI.

A week earlier, the government announced the introduction of temporary windfall taxes on a number of sectors. The tax on the banking sector's "extra profit" would raise an annual HUF 250 billion in 2022 and 2023.

The association noted on Friday that banks have "faced new tasks and tax burdens continuously since the 2008 global economic crisis", citing a temporary bank levy introduced in 2010, special fees for the National Deposit Insurance Fund (OBA), the Investor Protection Fund (BEVA), the Resolution Fund and oversight, the cost of ensuring free cash withdrawals to clients twice a month, and a duty on transactions.

"The Hungarian banking sector is opposed to the introduction of new extra tax burdens," the association said.

It added that the combined effect of those existing burdens along with the windfall tax "endanger" the sector's ability to be agents for economic development and act as intermediaries for capital.

The sector's tasks are to "maintain Hungary's economic impetus after the pandemic and in the shadow of the war [in neighboring Ukraine]", while "supporting Hungarian companies' regional activity through a recovery of competitiveness", the association said, adding that those tasks can only be carried out "in the absence of extra tax burdens" and with the "full termination" of the repayment moratorium and the "convergence" of rates paid on mortgage loans under a government-mandated rate cap with market rates.

"The extra taxes levied on financial service providers further reduce the banking sector's efficiency and lending ability, and increase the need to make provisions," the association said.

It added that the burdens give foreign companies offering cross-border financial services "an unfair advantage".

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