Hungary’s leasing market faces collapse as the country’s government pushes ahead with plans to introduce a crippling new tax on its financial services and banking
sectors.
The new tax is expected to cause an exodus from Hungary of international and foreign-owned leasing companies, which make up 90 per cent of the country’s leasing industry.
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“I think there will be international leasing companies [which will depart] from the
Hungarian market because of the new tax,” Lévai Gábor, head of the Hungarian leasing association, told Leasing Life.
Hungary’s top leasing companies, all of which are understood to be considering their next move, include Group Banca Intesa’s subsidiary CIB Lízing; Lombard Lizing, which is owned by German company VR Leasing; Erste-Immorent Leasing; UniCredit Leasing; and GE Capital’s subsidiaries Budapest Lízing and Budapest Car Financing.
Under the new tax law, lessors face paying up to an extra 9 billion forints (€31.3 million) in taxes.
This figure is based on government plans to impose an extra HUF12 billion (€41.8 million) in tax liabilities on financial services companies. Leasing companies represent up to three-quarters of Hungary’s financial services sector.
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By GlobalDataThe total extra tax across Hungary’s entire banking and financial services sectors amounts to HUF200 billion (€697.4 million).
The enlarged tax bill, which is based on net turnover, will hit lessors particularly hard as they already face heavy losses due to the global banking crisis.
Members of the association closed last year with a combined loss of HUF24 billion and their combined registered equity fell 15 percent to HUF66 billion, the Dow Jones newswire reported earlier this week.
The Hungarian leasing association has launched a last-ditch lobbying effort aimed at forestalling the introduction of the new tax. This campaign is targetted at the country’s banking association, as well as its government.
The new tax will help the government meet its 2010 budget deficit target of 3.8 percent of gross domestic product set under its International Monetary Fund/European Union credit line agreement.
Asked to comment on whether the government is likely to compromsie on the scale of the tax hike, Gábor said:”I don’t expect any decrease in the amount.”
Brendan Malkin
