BUDAPEST: Hungary's government should scrap a financial sector tax aimed at raising 187 billion forint per year, or at the very least cut it closer to levels seen elsewhere in the European Union, central bank Governor Andras Simor said on Thursday.
Prime Minister Viktor Orban's centre-right government has levied the tax as part of other "crisis taxes" through 2010-12 to stabilise the budget and create room for tax cuts for families and avoid austerity measures.
But the bank tax, combined with a controversial foreign currency mortgage relief scheme for households, has contributed to a further slowdown in lending, undermined investor confidence and is expected to weigh on already anaemic economic growth.
"It is necessary to abolish the bank tax, or at least cut it to a level consistent with the European level. The early mortgage repayment scheme should also be closed as soon as possible," Simor told a central bank conference.
With reference to ongoing talks between banks, the government and the central bank, Simor said any solution to the problem of foreign currency loans in Hungary should curb systemic risks, be fair and gradual.
"We should only seek a solution that decreases, not boosts, systemic risks," he said. "We should only seek a solution that aids those in need, not the rich. We should share the burden between banks, borrowers and the government," he said.
Simor added that any costs involved in a solution should not be kept reasonable and imposed gradually as neither banks, nor borrowers, nor the government could bear further big sudden burdens.
Simor added that it would be "rational" to cut the loan to deposit ratio of Hungarian banks from the current level of around 130 percent to 100 percent.
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