Hungarian government to remove special taxes in 2024

The government is planning to remove the “extra tax burdens” on the banking sector, the finance minister told an annual meeting of the Hungarian Banking Association on Friday.

Mihály Varga praised Hungary’s banks as “performing well in a worsening international environment”. The economy could not operate without a suitable banking sector, while banks could not be profitable without a well-performing economy, either, he added. Hungary’s high employment rate indicates that the economy could stand the test of war times, he said, adding that the goal was to maintain the economy’s activity in future.

Concerning banking, he said that the sector’s capital adequacy ratio was twice as high as the required minimum, while the loan/deposit ratio was also better than the European Union average.

The government has considered the windfall profit tax as a temporary measure and will remove it as earlier pledged. He added, however, that “full consolidation” of the economy still required bank financing. He also asked banks for their partnership in working out a solution for phasing out the special taxes.

Varga said the government expected a “higher growth” next year, with average inflation of 6 percent and deficit below 3 percent.

Referring to Ukraine’s blacklisting Hungary’s OTP Bank as a supporter of Russia, Varga said the government was standing by Hungary’s banks, adding that OTP had not violated any international rules and had “clearly refuted Ukraine’s false arguments”. “We will do everything to make Ukraine withdraw its groundless and unacceptable measure,” he said.

Banking Association head Radovan Jelasity said the sector was stable, but added that banking taxes were “disproportionately high”. “These burdens hinder operations and force the sector to take non-market reactions”. The sector needs more market, higher predictability, and an early removal of the extra taxes, he said. The association expects minimum growth this year and is working to avoid recession; the extra taxes are posing an “increasing problem” because clients will leave and seek foreign banks, he added.

The government can continue relying on Hungary’s banks; they will continue working “to benefit the Hungarian economy”, Jelasity said.