UPDATE 1-Slovak government plan to double and extend bank tax riles central bank


Reuters | Bratislava | Updated: 06-11-2019 18:31 IST | Created: 06-11-2019 17:54 IST
UPDATE 1-Slovak government plan to double and extend bank tax riles central bank
Representative Image Image Credit: ANI
  • Country:
  • Slovak Republic

Slovakia's government on Wednesday agreed to double a special tax on banks, and surprisingly to extend it beyond its planned expiration next year, drawing swift criticism from the central bank's head who called the move risk to financial stability.

The tax was adopted in 2012 to help build a buffer for potential crises and was scheduled to expire at the end of 2020. The plan to raise the banking tax, imposed on banks' liabilities after subtracting basic capital, to 0.4% from 0.2% had raised opposition from the eurozone country's banking sector, even before the government decided on Wednesday not only to raise the rate but also to keep it in place indefinitely.

National Bank governor Peter Kazimir, who himself led the finance ministry until moving to the central bank in June, said he had failed to convince the government to keep the rate down and with a time limit. "Today's government decision increases risks to the financial stability of the banking sector, both in terms of the rate and the continuation of the tax," he said.

The three-party government coalition, heading into an election in February, is looking to shore up revenue to keep the budget under control after scrapping plans to balance public finances this year because of a slowing economy. The proposed bill is expected to raise an additional 130 million euros per year.

The bank tax revenue goes to a special fund where it is held for use in future financial crises, which means it cannot be spent on government programs, but it helps the overall public sector fiscal balance. The main ruling party proposed on Tuesday to raise the tax as a reaction to what it called "outrageous profits and rising fees" of the country's banks, mostly foreign-owned.

To take effect, it must be approved by parliament. The ruling coalition has lost a majority and relies on independents' votes, but is still seen as likely to succeed in passing the measure.

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(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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