Economy
Hungary new bank tax would equal selective sovereign default - Felcsuti
The latest package of measures (tax hikes) announced by Economy Minister Mihály Varga on Monday left everybody perplexed and one may only guess as to what the government’s intention with the additional budget revenues could be. One of the reasons for the steps could be the slower-than-expected collection of revenues, but the general view is that that the budget is not in such trouble that would have justified this kind of corrective action. Another possibility, Felcsuti contemplated, is that the government is paving the way for an election-related profligacy, e.g. the career model for teachers that was to be implemented earlier.It was a general suspicion that bank customers are optimising their financial transaction tax (FTT) payments. There are three ways to do that: by using cash; by barter exchanges and by moving corporate cash flow abroad. I can also imaging that the cabinet miscalculated something, Felcsuti said.
Felcsuti said the 6% health care contribution on interest and capital gains is “awkward" and a “joke". They could have said that the personal income tax on interest income will be raised to 21% from 16%, but then the cabinet would have had to admit the flat-rate system does not work, he added.
Banks will also be obliged to pay a 7% levy on the HUF 612 bn stock of municipal debt assumed by the central government. Felcsuti said this is not the end of the story, because “if the banks prove to be very tough" it will raise the possibility of a selective sovereign default. The state in this case will not pay its entire debt and it is almost all the same whether it considers the different as part of the default or it imposes it in the form of a tax. Paying HUF 93 instead of HUF 100 “is indeed selective sovereign default," he said.
Felcsuti has information that there will be very serious talks on this matter, as there is absolutely no agreement yet between the banks and the government.
Felcsuti said the 6% health care contribution on interest and capital gains is “awkward" and a “joke". They could have said that the personal income tax on interest income will be raised to 21% from 16%, but then the cabinet would have had to admit the flat-rate system does not work, he added.
Banks will also be obliged to pay a 7% levy on the HUF 612 bn stock of municipal debt assumed by the central government. Felcsuti said this is not the end of the story, because “if the banks prove to be very tough" it will raise the possibility of a selective sovereign default. The state in this case will not pay its entire debt and it is almost all the same whether it considers the different as part of the default or it imposes it in the form of a tax. Paying HUF 93 instead of HUF 100 “is indeed selective sovereign default," he said.
Felcsuti has information that there will be very serious talks on this matter, as there is absolutely no agreement yet between the banks and the government.
