July 7, 2014 / 7:10 AM / 6 years ago

UPDATE 1-Hungary may rethink but not scrap bank tax -minister

* EU has said Hungary should phase out sectoral taxes

* Hungary may revise bank tax but not yet -minister (Adds quotes, context, detail)

BUDAPEST, July 7 (Reuters) - Hungary may revise its bank tax as new measures to unwind foreign currency loans could be costly for lenders, but it will not scrap the tax altogether, Economy Minister Mihaly Varga told public radio on Monday.

Hungary’s parliament on Friday adopted a new law compensating bank clients for unfavourable past adjustments on their foreign currency denominated loans, which the central bank estimates could cost banks up to nearly $4 billion.

In further measures expected for the autumn, the government plans to force a conversion of all remaining foreign currency mortgages into forints, which will probably cost banks yet more.

In return, Varga said, the government could revisit the country’s bank tax, one of the highest in the European Union and which has been a major bone of contention between Budapest and its international partners.

“I do not exclude that a revision or rethinking of the bank tax could happen since banks will take on a heavy burden to compensate clients, but the time for that is not now,” Varga said in an interview.

The EU has said Budapest should phase out sectoral taxes, which it said were “distortive”.

Varga said the government was not likely to heed that.

“This (tax) has been a very important part of the stabilisation of the Hungarian economy, the creation of a new burden-sharing. I doubt we should accept Brussels’ views in this question.”

He reiterated that banks would have to repay clients for past unilateral contract adjustments by September, then the government would wrap up work on the conversion of foreign currency loans by November.

That would allow an actual conversion of the loans by December, as promised at the weekend by a senior ruling party official, who also said the government could step in and share some of the costs of the conversion. (Reporting by Marton Dunai; Editing by Catherine Evans)

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