The government’s latest unorthodox austerity tax on banking transactions raises the question of whether they have tried it in another country, if so, what it has done or not, why not use it elsewhere.
After searching for the topic
I found several studies that showed that dozens of Latin American and Asian countries had made a temporary experiment with this tax. True, they were not as brave as we are, in most countries, only large cash withdrawals (India, Pakistan), large corporate payments (Mexico), bank loans (Colombia), check purchases and bank deposits (Brazil) (that is, only deposits and not transactions!) were charged a transaction tax. The Hungarian tax on all types of transactions, although not unprecedented, was quite rare.
(Note: Many are confusing the “financial transaction tax” that is purely for trading securities with the “bank transaction tax” affecting everyone. The former is something the EU wants to introduce at some point, or Sweden, for example, the latter being the Hungarian Government and the other countries mentioned in the other articles.)
Looking at countries that have already tried bank transaction tax
Two lessons can be drawn: first, that almost every country introduced this tax in the event of some kind of economic bankruptcy; for example,
Argentina routinely introduced a transaction tax in the following years: the fiscal crisis of 1975. after the 1982 credit crunch, the 1988 hyperinflation, the ’91 convertibility and credit crunch, and the 2001 state bankruptcy.
Colombia raised this tax after the 1999 earthquake, after the worst bankruptcy in Ecuador introduced the transaction tax in 1999 for two years, following the collapse of Venezuela’s 1994 banking system and the 1999 oil price fall.
But Papua New Guinea and Vanuatu also belong to this club. So Hungary is joining a third-world company in serious trouble with the introduction of the tax.
Taxation of banking transactions was not, as in our country
a substitute for a real order of the budget, but was generally used to deal with an emergency (hyperinflation, the collapse of the banking system, natural disaster). The exception is Brazil, which wanted to treat its health reform with this tax.
The other lesson from the FTT is that most countries quickly removed the tax after it was introduced because it had a lot of negative consequences: large amounts of account traffic fled abroad (which I wrote about here), increased cash use, and partly the black economy too.
Banks’ profitability and, in this context, their willingness to lend fell sharply in these countries, which had a negative impact on economic growth. For this reason, this type of tax has lived in most countries for 2-4 years, after which it was eliminated quickly. It is currently used by only eight countries, six in Latin America (Argentina, Bolivia, Colombia, Dominican Republic, Mexico, Peru), and Pakistan and Sri Lanka.