November 22, 2011 / 3:02 PM / 8 years ago

Hungary may lift bank tax if courts strike FX scheme-source

* Ruling Fidesz wants budget defence against adverse court rulings

* If court rulings lead to new expenses, tax hike must follow-bill

* Measure tailored for bank sector and FX repayment scheme-source

BUDAPEST, Nov 22 (Reuters) - Hungary’s government may hike its bank tax to raise necessary funds if courts rule the state must pay back banks for their losses on its controversial foreign exchange repayment scheme, a source with knowledge of the matter told Reuters on Tuesday.

A new piece of legislation published on Parliament’s website www.mkogy.hu says rulings of Hungary’s Constitutional Court or the European Court of Justice could trigger targeted tax hikes to cover necessary extra spending, without specifying the financial sector.

The source said the move was aimed at the banking sector.

Hungary’s banks turned to the Constitutional Court after Parliament passed a law in September to allow households to repay FX mortgage loans at exchange rates far below current market rates.

The banks, which stand to lose hundreds of billions of forints on the conversions, have also asked the European Commission to weigh in on their behalf.

Top officials at eight big banks have urged the European Commission to support them in a dispute with Hungary over a law that saddles lenders with big losses on foreign-currency loans.

“If a decision of the Constitutional Court or the European Court of Justice leads to state payment obligations for which the sum previously set in the budget law is insufficient... a contribution must be charged to cover the common needs, exclusively and specifically tied to meeting this obligation,” the Fidesz legislative proposal says.

Hungary levied a special tax on the financial sector, worth an annual 187 billion forints ($820 million) in 2010-2012, to help plug budget holes.

$1 = 227.9451 Hungarian forints Reporting by Marton Dunai; editing by Patrick Graham

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