Are you sure?

MNB could have loss because of not passing on transaction duty – Fidesz's Rogán

The National Bank of Hungary (MNB) could generate loss because it does not wish to pass on the new financial transaction duty to the banks, Antal Rogán, head of the governing Fidesz parliamentary group said on the commercial television channel TV2 Tuesday morning. Extending the duty to the MNB will be an issue for discussion with the ECB and the IMF, he said.

"I am not sure that this step of the governor is the right one, but as the central bank is independent, we do not wish to criticize this step", Rogan said about Monday statement by MNB governor András Simor.

Simor said that the Bank does not wish to pass on the duty – which is to be extended to the MNB's depo transactions under an amendment submitted last Thursday to the bill before Parliament – as that would mean a 2.5-percentage-point cut in the base rate. If the central bank wished to cut interest rates, it would do so within its own competence, he said. If, however, it wanted to maintain monetary conditions unchanged with the new tax, it would have to raise the present 7% base rate by 2.5 percentage points.

Simor said that the extension of the duty would give the budget only temporary revenue, because the near HUF 100 billion loss of the central bank resulting from the tax in 2013 must be refunded by the central budget in 2014.

Rogán said it was yet early to tell whether the MNB will have a loss in 2013 and what would be the size of any eventual loss.

Simor should have considered on what partners to pass the transaction duty and who would be exempt instead of making such a hasty response, the Fidesz parliamentary group leader noted. Those placing deposits with the MNB are banks as well as those making forint transactions, including speculators, he said.

There were disputes regarding the introduction of the extraordinary bank levy, and similar disputes can be expected now, Rogán said in response to a question what will be the likely reaction of the European Central Bank to the extension of the duty to the central bank. The extension will surely be discussed during the negotiations with the IMF, he said.

On Monday Simor said the amendment that would impose transaction duty on the MNB is unlawful, because by limiting the central bank's right to freely dispose of its financial assets hurts the independence of the institution. The MNB will tell Parliament its opinion even without Parliament asking for it, Simor added.

The government plans to raise finance for tax cuts in its new action plan, aimed to boost employment, through extending the financial transactions duty to the MNB and to the State Treasury.