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Prime Minister Viktor Orban's announcement late on Wednesday
that his government will "oblige banks, insurers, large retail
chains, the energy industry and trading firms, telecoms
companies and airlines to pay a large part of their extra
profits into two state funds" rattled investors and recalled
memories of similar taxes Orban had used to fix the budget after
he swept to power in 2010.
Some of those previous temporary special taxes are still in
effect and squeezing the profits of a wide range of sectors,
again boosting instability for investors, analysts said.
Orban needs to rein in a swelling budget deficit and prevent a
marked slowdown in the economy while inflation is expected to
accelerate into double digits in coming months.
His government is due to announce details of the measures at
1230 GMT. The banks and companies affected declined to comment
ahead of the announcement. The central bank also declined to
comment.
"The temporary sectoral windfall taxes do not affect
manufacturing companies," Foreign Minister Peter Szijjarto said
on Thursday, adding that Hungary still offered "the most
competitive investment environment in Europe."
But MOL shares were down close to 9%, OTP fell 4.2%, trimming
earlier even sharper losses, and Magyar Telekom stocks dropped
almost 6% by 0950 GMT.
Orban said the new windfall taxes would be applied in 2022 and
2023. Some of his earlier special taxes -- like a tax on bank
transactions -- have become a lasting part of Hungary's tax
regime and banks have passed on the costs onto clients.
The new taxes will raise revenues for the budget, which has a
big deficit after Orban's pre-election spending spree and caps
on energy bills which helped him win a landslide last month.
But they signal instability for investors.
"These steps do not send a good message in terms of investor
confidence ... as an investor you look at which sector will
outperform, and you cannot find any because when you have a
sector that outperforms, the government takes the profit away,"
said Bence Jozsa, an analyst at brokerage Equilor.
"This is what we can see now, and that's why stocks are
plummeting."
Last week, Orban's new minister for economic development Marton
Nagy told a parliament hearing that the government wanted to
boost the share of domestic ownership in further key strategic
sectors. Over the past decade, businessmen close to the
government have acquired large chunks of the bank sector, media,
and energy companies.
Nagy mentioned food retail chains, and insurance companies, and
telecoms where "domestic ownership must become dominant." These
are some of the sectors to be affected by the new taxes, which
will squeeze companies' profit margins.
(Reporting by Krisztina Than and Anita Komuves; Editing by Jane
Merriman and Bernadette Baum)
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