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Gov't Introduces 'Defense Contribution' for Multinational Companies

Government

The government will levy a "defense contribution" on the wartime windfall profits of multinationals, Gergely Gulyás, the head of the Prime Minister's Office said at a regular press briefing on Monday, according to a report by state news wire MTI.

Gulyás said the contribution would be paid by banks, multinationals, and energy companies. He added that there would be "no substantial change" in the scale of the bank levy for lenders whose holdings of government securities had not increased. The minister also noted that the transaction duty would be raised, and a duty would be levied on FX transactions.

A freeze of retail bank account and bank card fees will be introduced to prevent lenders from passing on the defense contribution to their clients, he said. The windfall profit taxes on energy companies, multinationals, and retailers will not be reduced in 2024, he added.

The measures are part of an "anti-war action plan" the government has decided to carry out, he said. Under another measure of the plan, regulations will be introduced requiring transparency of media and political parties with the aim of countering what he called "wartime propaganda".

Fielding questions, Gulyás said the defense contribution would raise budget revenue by "close to HUF 400 bln" in 2024. The decree on the measures will be published later in the week and will enter force on August 1, he added.

The earlier windfall profit tax levels will be maintained, while the transaction duty will rise from 0.3pc to 0.45pc parallel with an increase in the cap on the duty from HUF 10,000 to HUF 20,000, he added. The duty on cash withdrawals will rise from 0.6% to 0.9%, although withdrawals up to HUF 150,000 a month will still be exempt, he said. A 0.45% duty will be levied on FX transactions with a HUF 20,000 cap, he added.

National Economy Minister Márton Nagy informed the heads of the Hungarian Banking Association of the details of the defense contribution at a meeting on Monday, his ministry said in a statement. Lenders will be allowed a tax preference up to 50% on additional purchases of government securities maturing after 2027. The preference can be claimed on daily average government securities stock in January-November 2024 compared to a base period of January-April 2023, the ministry said. Calculating with a HUF 260 bln target for revenue from the windfall profit tax on lenders, banks could save as much as HUF 130 bln, it added.

The windfall profit tax will remain in place in 2025 and the nominal value of the tax will not be reduced. Tax preferences for increases in government securities stock will be calculated based on daily averages during January-November 2025, compared to a base period of January-November 2024.

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