Opinion of the European Central Bank of 24 July 2012 on the financial transaction tax (CON/2012/59)
Date: 2012-07-24
Institutions: European Central Bank
Subjects: Hungary, financial transaction, national law, price stability, tax

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 July 2012 

on the financial transaction tax 

(CON/2012/59) 

Introduction and legal basis 

On 3 July 2012, the European Central Bank (ECB) received a request from the Hungarian Ministry for 

the  National  Economy  for  an  opinion  on  a  new  draft  law  introducing  a  financial  transaction  tax 

(hereinafter the ‘FTT Law’). On 5 July 2012 the ECB received a request from the Ministry for an opinion 

on a new amending proposal to the FTT Law. On 9 July 2012 the Parliament adopted the FTT Law with 

the changes introduced by the new amending proposal. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  third  indent  of  Article  2(1)  and  Article  2  (2)  of  Council 

Decision  98/415/EC  of  29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions1, as the FTT Law relates to the Magyar Nemzeti Bank 

(MNB) and its monetary policy instruments. In accordance with the first sentence of Article 17.5 of the 

Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the FTT Law 

The FTT will become payable in connection with:  

(a)  

the specified types of payment obligations whereby at the value date of the relevant transfer order 

the  payment  service  provider  with  a  head  office  or  branch  in  Hungary  is  obliged  to  pay  the  tax 

calculated as a percentage of the amount debited on the payer’s payment account or of the money 

transfer. The applicable tax rate is 0.1%, subject to a cap of HUF 6 000 per payment; and  

(b)  

the  issuance  of  MNB  bills  with  a  maturity  of  up  to  two  weeks,  or  the  placement  of  overnight 

deposits with the MNB, whereby at the issuance or the value date, the MNB is obliged to pay the 

tax  calculated  as  a  percentage  of  the  face  value  of  the  security  discounted  with  the  daily  central 

bank base interest or of the amount of the overnight deposit. The applicable tax rate is 0.01% for 

the overnight deposits and 0.1% for the MNB bills, without a cap. 

1 

OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                 
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2.   Breach of the consultation obligation 

The  ECB  received  the  initial  request  by  the  Ministry  for  an  urgent  consultation  on  the  FTT  Law  on 

3 July 2012.  A  revised  version  of  the  law,  introducing  further  changes  to  the  MNB-related  provisions, 

was received by the ECB on 5 July 2012. The Parliament adopted the FTT Law less than two business 

days later on 9 July 2012. 

According to Article 4 of Decision 98/415/EC, the ECB must be consulted ‘at an appropriate stage’ in the 

legislative process. This implies that the consultation should take place at a point in the legislative process 

which affords the ECB sufficient time to examine the draft legislative provisions and adopt its opinion, 

and also enables the relevant national authorities to take the ECB’s opinion into consideration before the 

provisions are adopted.  

In  this  respect,  the  ECB  once  again  stresses  its  position  that  even  cases  of  particular  urgency  do  not 

relieve national authorities from their duty to consult the ECB and to allow sufficient time to take into 

account  its  views  in  accordance  with  Decision  98/415/EC.  The  Hungarian  Government  should  have 

postponed  the  final  vote  on  the  draft  law  until  such  time  that  would  have  allowed  for  a  proper 

consultation  with  the  ECB,  as  well  as  due  consideration  of  the  ECB  Opinion.  Furthermore,  the  ECB 

would appreciate the Ministry honouring its obligation to consult the ECB in due time in the future. 

3.   Effects of the FTT on the MNB 

The  MNB  is  a  public  institution  whose  primary  objective,  in  line  with  the  Treaty,  the  Statute  of  the 

European  System  of  Central  Banks  and  of  the  European  Central  Bank  (hereinafter  the  ‘Statute  of  the 
ESCB’) and the Law on the MNB, is to maintain price stability2. The main task carried out by the MNB 

for maintaining price stability is to define and implement monetary policy. In performance of such tasks 

by the MNB, the Hungarian authorities should respect the principle of central bank independence. 

The principle of central bank independence referred to in Article 130 of the Treaty and Article 7 of the 

Statute of the ESCB requires inter alia that: (i) an NCB’s functional independence is ensured by having 

the necessary  means  and instruments for  achieving  price  stability  independently  of  any  other  authority, 

(ii) an NCB’s institutional independence is respected and the NCB is not influenced by third parties in the 
performance of its tasks, and (iii) an NCB enjoys financial independence3.  

However, the new FTT Law impairs MNB’s functional and institutional independence4.  

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4 

Article 127(1), first sentence of the Treaty and Article 2, first sentence of the Statute of the ESCB. Section 2(1) of Law 
CCVIII of 2011 on the Magyar Nemzeti Bank. 
The  concept  of  financial  independence  should  be  assessed  from  the  perspective  of  whether  any  third  party  is  able  to 
exercise direct or indirect influence over the NCB’s ability to fulfil its mandate, both operationally in terms of manpower 
and  financially  in  terms  of  appropriate  financial  resources.  See  ECB  Convergence  Report  May  2012, p. 25.  The  NCB 
should in all circumstances have at its disposal the necessary resources to conduct monetary policy. Hence, it is of utmost 
importance to allow the central bank to make a sufficient provision of reserves during years of profits in order to face 
possible future losses without weakening its financial means to implement its monetary policy. See also paragraph 2.4.1 
of ECB Opinion CON/2009/83. 
See also Section 1(2) of Law CCVIII of 2011 on the Magyar Nemzeti Bank. 

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First, it disrupts the monetary policy transmission mechanism5 by affecting the attractiveness of overnight 

deposits and MNB bills to the MNB and commercial banks, depending on the final burden-sharing of the 

tax.  

In  this  respect,  while  generally  a  central  bank  is  expected  to  exercise  financial  prudence,  its  measures 

need to  be  driven  by  its  monetary  policy  role and not  by  profit/cost  assessments. Thus,  in  line  with its 

mandate, the MNB may not simply transfer the burden of the FTT to its counterparties by, for instance, 

lowering  its  deposit  interest  rate.  The  MNB  is  not  a  commercial  entity  and  such  decision  has  to  be 

determined by price stability concerns such as a need to increase liquidity in the market. In addition, the 

FTT  can  indirectly  affect  monetary  policy  implementation  through  its  likely  detrimental  impact  on 

financial market liquidity that could impede price discovery. This will complicate the achievement of the 

MNB’s monetary policy objectives.  

Second, the FTT affects the ability of the MNB to select freely the monetary policy tools that best serve 

the  primary  objective  of  price  stability,  as  it  introduces  cost  considerations  that  are  unrelated  to  the 

original  design  of  such  tools.  Thus  monetary  policy  instruments  best  suited  for  transmitting  the  MNB 

policy decisions to the wider economy in the absence of the FTT could be severely disabled by subjecting 

them to the FTT.  

In  addition, the imposition  of  the  FTT  on  the  MNB’s  operations,  which is  not justified  for  the  reasons 

specified above, may interfere with the MNB’s financial independence. The MNB would need to pay the 

FTT from its own resources leading to de facto limiting the financial resources available to the MNB to 

carry out its ESCB-related tasks.  

The  imposition  of  a  tax  on  the  MNB’s  monetary  policy  operations,  which  is  not  compatible  with  the 

MNB’s functional and institutional independence and thus not justified for the reasons specified above, 

could also be seen as creating means to finance the public sector from central bank money. Therefore, the 

MNB’s payment of the FTT to the State is not compatible with the monetary financing prohibition laid 
down in Article 123(1) of the Treaty6.  

4.   The general impact of an unharmonised introduction of the FTT 

The  ECB  has  drawn  attention  to  the  potential  negative  side-effects  of  the  Hungarian  Government’s 

previous  policy  of  temporarily  raising  the financial  sector’s tax burden  on the financial sector’s capital 

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6 

Since  the  summer  of  2001,  monetary  policy  in  Hungary  has  been  conducted  within  an  inflation-targeting  framework, 
under which the MNB aims to meet a publicly announced inflation target using various monetary policy instruments. The 
main  instrument  of  monetary  policy  is  the  central  bank  base  rate,  which  affects  future  inflationary  developments  via 
various channels of monetary transmission. Within this framework, the MNB conducts open market operations with two-
week  MNB  bills  (debt  issuances)  that  carry  the  base  rate,  and  accepts  deposits  by  commercial  banks  at  interest  rates 
linked to the base rate, with a corresponding impact on banking sector liquidity and the wider spectrum of interest rates. 
The prohibition on monetary financing under Article 123 of the Treaty aims at preventing central banks from providing 
overdraft  facilities  or  any  other  type  of  credit  facility  to  the  public  sector,  which  includes  any  financing  of  the  public 
sector’s obligations vis-à-vis third parties. See ECB Convergence Report May 2012, p. 28. 

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accumulation  ability  and  credit  availability7.  The  FTT  Law’s  introduction  of  a  permanent  FTT, 

particularly in a manner which is not harmonised with other Member States, may produce distortions in 

financial  markets  and  the  real  economy  through:  (i)  increasing  the  cost  of  capital  as  the  tax  burden  is 

likely to be shared with users of financial services, (ii) reducing financial market liquidity and access to 

finance,  by  increasing  the  costs  of  transactions,  and  (iii)  producing  incentives  for  tax  evasion  and/or 

avoidance that may, inter alia, divert economic and financial activity to other Member States. The ECB 

draws the attention of the Hungarian authorities to the advanced legislative process for harmonisation of 

the  FTT  at  Union  level  through  the  proposal  for  a  Council  directive  on  a  common  system  of  financial 
transaction tax and amending Directive 2008/7/EC (hereinafter the ‘proposed FTT Directive’)8. While the 

legislative  process  is  still  on-going,  the  ECB  considers  that  such  harmonisation,  in  particular  the 

exclusion  of  transactions  with  the  ESCB  central  banks  from  the  FTT  base,  is  important  to  avoid  a 

‘negative  impact  on  the  refinancing  possibilities  of  financial  institutions  or  on  monetary  policies  in 
general’9 and to mitigate economic distortions. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 24 July 2012. 

[signed] 

The Vice-President of the ECB 

Vítor CONSTÂNCIO 

7 

8 
9 

See  paragraph  3.2  of  ECB  Opinion  CON/2010/62.  In  2010,  a  special  tax,  envisioned  as  a  temporary  measure,  was 
imposed on financial institutions. The tax was applied at differentiated tax rates on banks’ balance sheet totals at 2009 
(constant base). 
COM(2011) 594 final of 28 September 2011.  
See Article 1(4)(d) and recital 6 of the proposed FTT Directive.  

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