Slovak ruling party looks at lifting bank sector tax next year

BRATISLAVA, Nov 5 (Reuters) - Slovakia’s ruling Smer party has proposed increasing a special banking sector tax to 0.4% from 0.2% in 2020, which is meant to be the final year that it is applied, to help boost budget coffers, party chairman Robert Fico said on Tuesday.

The tax on banks’ liabilities after basic capital was introduced in 2012 to help build a buffer for potential crises and was scheduled to expire at the end of next year.

The banking industry raised objections last month when government coalition lawmakers mulled extending its application.

Smer, a leftist party, wants to respect the original deadline for ending the tax but instead aims to raise the levy in its final year, Fico said, because Slovak banks, largely foreign-owned, are among the most profitable in the European Union.

“The (party has) to react to their outrageous profits and rising fees,” he told reporters.

The proposed bill is expected to raise an additional 130 million euros ($144.42 million) in budget revenues and will be discussed by the three-party coalition government on Wednesday.

The Finance Ministry recently scrapped plans to balance the budget this year and in 2020 because of slowing growth and the extra revenue will help the state meet a deficit target of 0.49% of economic output next year.

Slovakia’s banks - including big ones such as KBC Group’s CSOB, Erste Group Bank’s Slovenska Sporitelna , Raiffeisen’s Tatra Banka and Intesa Sanpaolo’s VUB - have avoided troubles seen by other banks in Europe in the decade since the global financial crisis.

Their combined profits grew 4.7% year-on-year to 640.3 million euros last year. In the first nine months of 2019, profit has fallen 4.2% to 497 million euros.

Slovakia, pushed by a hot real estate market, has seen lending jump in recent years and the country is among a handful of EU states requiring banks to keep an extra countercyclical capital buffer to hold down risks.

$1 = 0.9002 euros Reporting By Tatiana Jancarikova Editing by Gareth Jones