Hungarian Banking Association reacts to bank tax amendment
Banking Association responds
The Hungarian Banking Association has issued the following reaction to the change in the windfall tax on the financial sector published last night in the Hungarian Gazette:
"The natural basis of income tax is profit. The banking sector's return on equity is far below inflation, so there is no extra profit at sector level. The tax system should be transparent, simple and competition-neutral, and special taxes should be temporary. Continuous changes to the regulatory framework and the long-term maintenance of transitional measures will reduce investor confidence and our country's competitiveness. Therefore, the Banking Association continues to call for the abolition of the special tax as soon as possible."
What has changed?
In addition to the special tax on banks, which has been in place since 2010, the government introduced a windfall tax, or as it likes to call it an 'extra profit tax', in the middle of last year to skim off part of the bank profits from the rise in interest rates. The tax liability is based on the net turnover calculated on the basis of the annual accounts for the previous tax year, in accordance with the Income Tax Act (Act C of 1990 on local taxes). The tax rate was 10% in 2022 and 8% this year, due to the dynamic growth of the tax base.
This is what the government is reaching into now, and the change published in the decree last night essentially affects the second half of the year:
- from 1 July 2011, the tax base will change, and 50% of the profit from the sale of goods and services not made in the ordinary course of business in the previous year (i.e. the part per half-year) will be taxed instead of the previous net turnover,
- 50% of the bank tax charged in the preceding year, 50% of the financial transaction tax paid and 50% of the extra profit tax shall be taken into account as an addition,
- the tax rate will also change accordingly: the tax base (i.e. the adjusted profit) will be 13% for the part of the tax base not exceeding HUF 10 billion, and 30% for the amount above that.
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