TAX NEWS - June 2010

Hungary Tax: Hungarian Banks May Limit Lending on Tax, Erdei Says

Hungarian banks may limit their lending activity because of a new tax on the financial industry proposed by Prime Minister Viktor Orban, said Tamas Erdei, the head of the country's banking association.

"The amount of loans available depends basically on capital for every bank," Erdei said in an interview on state- run M1 television today. "If capital supplies from profits cease to exist, that clearly narrows the amount of money available for lending, from a bank operations perspective."

Hungary plans to tap the financial industry for 200 billion forint ($844 million) this year, compared with a budgeted 13 billion forint, as part of Orban's plan to meet the country's creditor-approved budget deficit target of 3.8 percent of gross domestic product.

The plan was approved by the government after the currency dropped 4.8 percent in two days last week on concern about a Greece-like debt crisis. Measures include cuts in public spending, a reduction of the personal income tax and a lower corporate income tax for small businesses.

The forint traded at 283.22 per euro at 7:59 a.m. in Budapest, from 284.06 late yesterday.

Erdei said he sees "no problems" with a proposed ban on registering foreign-currency mortgages.