Hungarian parliament adopts economic package including controversial bank tax

Hungary's parliament, in which the ruling Fidesz party holds a two-thirds majority, adopted a package of economic measures on Thursday in a vote of 301 in favor, 12 opposed and 1 abstention.

The package included a heavily disputed bank tax, albeit, an even more heavily disputed exemption was scrapped before the bill was put to a vote.

The bank tax, which the International Monetary Fund (IMF) and European Union (EU) have warned would slow down growth by cutting back on lending, will yield 200 billion forints (about 904.98 million U.S. dollars) this year. The government says the tax is necessary to avoid hitting the public with another round of austerity measures, something it promised not to do. Prime Minister Viktor Orban called the bank tax "necessary, fair, and effective."

Removed from the bill at the last minute was an exemption for financial institutions established after 2007, which would have granted an exemption to an insurance company in which Zsigmond Jarai, the governing Fidesz party's former finance minister and central bank governor, holds a leading interest.

Another disputed portion of the newly adopted package puts a cap on public sector salaries, effectively reducing the salary of the current central bank governor, Andras Simor, from 8 million forints per month to 2 million. The ruling Fidesz party has been attempting to force Socialist-appointed Simor to resign, despite EU and IMF protests that the actions, including the salary cut, are endangering the independence of the bank.

The package also contains a series of smaller measures that include allowing people to employ ad hoc household help without having to pay employment taxes, allowing farmers to make small amounts of excise-tax free alcoholic beverages for their own consumption, eliminating inheritance taxes to direct descendants and ending a luxury tax on high performance vehicles (aircraft, boats, and cars) introduced by the previous administration. It also banned banks from issuing home mortgages in foreign currencies. (1 U.S. dollar = 221 forints)

Source:Xinhua