Operation of the domestic payment system
2.4 Developments in Hungarian and international regulation affecting payments and financial infrastructures in Hungary Effective as of 2015, the modified financial transaction tax supports a more intensive use of payment cards for purchases, and creates a possibility for card issuers to promote card use more actively. Under the former rules, payment service providers issuing cards paid 0.3 per cent of the value of card purchases in financial transaction tax. Although this was limited to HUF 6,000 per transaction, in practice, due to the typically low amount of card purchases, for the vast majority of transactions the limitation did not reduce the tax liability. Consequently, as the volume of card purchases increased, issuers also incurred a higher tax liability. This reduced issuers’ incentives to promote card use despite the fact that, as the MNB’s previous analyses have found, in the majority of cases the transaction tax was passed on by payment service providers to consumers in annual card fees.39 However, the amount passed on mostly covered the tax liability arising in respect of the average annual volume of card purchases. This solution increased cross-pricing between services and customers, while it failed to provide coverage for the higher tax liability on the volume of purchases increasing at a higher rate than previously estimated. As a result, issuers were less interested in an increased volume of purchases, since that would have led to a higher ratio, within their tax liability, of taxes which are not passed on. The amended legislation effective as of 2015 addresses the above problem by imposing a single lump-sum transaction tax on payment card purchases without regard to the intensity of card use. Accordingly, where in the year preceding the year concerned a payment card was used for payment on at least one occasion, then a lump-sum transaction tax of HUF 800 is payable on the total volume of purchases made with the card. The regulation therefore supports issuers’ incentives to promote card use, since as the volume of card purchases increases as a result of such incentives, the tax charged per transaction will decrease. Additionally, the regulation gives priority to the 39
issuance of modern cards using contactless technology by imposing a lower lump-sum tax liability of HUF 500 on such cards. The modified transaction tax may therefore revive issuers’ interest in promoting card use more intensively, and the MNB indeed expects market participants to contribute more actively to the increased use of payment cards. Hungarian legislation to be amended pursuant to the Payment Accounts Directive could, as early as in the second half of 2016, enable the creation of the first payment account schemes with basic features, simpler process of bank switching, and a more transparent pricing of payment services. The Directive primarily aims to make the payments market of the European Union standardised and more transparent for consumers. The transposition of the provisions of the Payment Accounts Directive into Hungarian law opens up new possibilities for consumers in the field of access to payment services, which could contribute to the more widespread use of electronic payment solutions. Consumers who currently do not hold payment accounts will gain access, under transparent terms, to the payment services that are essential for the execution of electronic payments at low cost. In this regard, legislation should consider the need for payment account with basic features to support the financial inclusion of consumers excluded from the use of electronic payment services, and to facilitate the more intensive use of such services for consumers who currently hold accounts but, for various reasons, make no or only limited use of them. Payment services with basic features and their volume to be provided at low cost need to be determined following a thorough survey of retail payment habits in order to ensure alignment with the payment habits of the target customer group, and to encourage customers to use socially efficient electronic payment solutions. The payment account with basic features must be available nationwide. In order to ensure interoperability in the
T amás Ilyés, Kristóf Takács, Lóránt Varga: Changes in the fees on payment services and the structure of payments following the introduction of the financial transaction tax. MNB Bulletin, March 2014.
Payment Systems report • June 2015
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