Ten European member states are pressing ahead with the support of the Commission to introduce an FTT under enhanced cooperation, but Hungary is not one of them.
The Commission’s model will see these 10 countries introduce a 0.1% tax on trading in shares and bonds and a 0.01% rate applied to derivatives transactions across the EU.
With a rate of 0.1% applied to a broad range of financial transactions, Hungary's FTT is similar to the Commission's but it goes further by hitting individuals as well as financial institutions.
France had initially opted to introduce its own, quite different version of the FTT, but now it is proceeding with enhanced cooperation, the Commission will expect it to adapt its tax to fit.
“Member states that join the EU FTT will have to align any FTT they have at national level to that which is agreed at EU level,” said Commission spokeswoman Emer Traynor. “However, it is worth remembering that what the Commission has proposed is minimum rates, so if member states want to go above these minima, they can.”
Advisers believe Hungary is unlikely to support the Commission’s plan and will instead press ahead with its own FTT.
“If the tax delivers the expected revenue without triggering hard to manage reactions from the banking industry, then my expectation is that the tax will be long lived and the government will not volunteer to scale it back to the level that exists in the EU, unless it is pressed to do so,” said Tibor Palszabo of Ernst & Young.
Janos Kelemen of PwC thinks the main issue is timing.
"The Hungarian FTT will come into effect January 1 2013 and the government already counted with this revenue for next year," said Kelemen. "I'm not sure whether the enhaced co-operation could have achieved similar timing."
Palszabo points out that the primary goal of the Hungarian government is to maximise income while remaining in line with its declared policy objectives of keeping a the low, flat personal income tax rate, avoiding the introduction of wealth taxes and increasing tax revenues from consumption taxes.
“My impression from the communication around the legislative process is that the Hungarian government probably took the concept of the FTT from the Commission materials, but they developed it one step further and used the idea to create a new revenue source that is more powerful than the EU's original FTT,” said Palszabo. “This is not a unique phenomenon in Hungary, as the government has acted as a creative innovator in terms of taxes in the past two years.”
