Hungary in debate with IMF/EU over bank tax - Varga

Varga reiterated that formal negotiations with the International Monetary Fund (IMF) and the European Commission on a precautionary credit facility are currently not underway. He noted, though that consultations are in progress, primarily about whether the tax measures implemented over the past months and years could be phased out and the tax burden could be reduced or not. And if they could be phased out how could the lost revenues be made up for. The talks are on whether or not the cabinet can lower the bank tax for 2013 and if it did, what could it be replaced with, Varga added.

He said the bank tax and the financial transaction tax (FTT) are the two most commonly raised subjects at the consultations. The IMF’s Resident Representative, Iryna Ivaschenko also said in October that there are some points they view differently and thus cannot accept, Varga reminded.

The government announced in its announced within six weeks that the bank tax will remain in the system in 2013 too, and it will not be halved as pledged earlier. It turned out the levy is here to stay - forever.

Prime Minister Viktor Orbán practically reaffirmed this when he said last Friday in a radio interview that “the tax regime has no temporary element. [...] No more temporary items; whatever is in it will remain in the tax system in the long term. [...] We will not lower the levy on banks, the tax on energy companies and in general the tax on corporates in a monopolistic situation."
In 2013, the banks are also obliged to pay some HUF 260 billion worth of financial transaction tax.

The next round

Varga reminded that Hungary has been under the EU’s excessive deficit procedure (EDP) since its accession to the bloc in 2004 and that it must keep its budget deficit below 3.0% of GDP in order to have the EDP lifted. “If we cannot meet this target the country will lose EU funds," he added.

There is no such specific number the IMF wants Hungary to achieve, as they are discontent with the structure of growth, Varga said.

“This is an odd situation. We have two negotiating partners, the EU and the IMF, but even their standpoints differ. One of them is focused on the structure of growth and it expects measures in that area. The other wants specific figures to be reached," he explaned.

Varga said the IFIs will assess the 2013 budget of Hungary after its approval and the talks may resume afterwards.

Hungarian MPs will vote on amendment proposals to the 2013 budget his week and the final vote can take place next week.

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• imf,
• economy,
• tax,
• mihaly varga,
• orbán,
• commission,
• credit line