The FINANCIAL -- The Hungarian government plans to
extend a proposed financial transactions tax to its central bank (MNB),
an MNB spokesperson said Wednesday.
"The government has informed us, as well as the European Central Bank , of its plan to tax the MNB via its new financial transactions tax," the spokeswoman told AFP.
Central bank chief Andras Simor, who has been at odds with the government, already described the plan as "illegal, dangerous and incomprehensible" on Monday, but the ECB was only informed on Tuesday.
Prime Minister Viktor Orban announced earlier this week a one-billion-euro ($1.26 billion) plan to reduce unemployment, to be funded by a financial transactions tax from 2013 onwards.
The idea, which was presented a few months ago, was to impose a levy on all financial transactions, money transfers, withdrawals and deposits, made by companies or individuals.
As EUbusiness reported, however, the economy ministry recently proposed imposing the new tax on the central bank as well, a move that observers described Wednesday as unusual.
"Usually, central banks are not subject to the tax as all their profits go into the state's budget," the daily Nepszabadsag said in a commentary.
"If (MNB) passes the tax on to its clients, this will lead to total chaos in the system of interest rates," it warned.
The ECB had not yet reacted to Budapest's proposal on Wednesday afternoon.
Last week, it had welcomed amendments to a much criticised Hungarian central bank law, noting that this "addresses the most important remaining concerns regarding the MNB's independence."
The law on the central bank has been at the heart of a long-standing dispute between Budapest and the EU and International Monetary Fund, hampering talks over a crucial credit line of 15 billion euros ($20 billion) for Hungary.