Windfall taxes on banks led to banking crises in five European countries — Ukraine Economic Outlook study
In this study we set out to assess how the “super-tax” on bank profits, first levied at 50 per cent on 2023 profits, has affected the current state of Ukraine’s financial and credit system.
First, we reviewed foreign case studies of similar or comparable “elevated taxes” on banks, looking not only at their fiscal yield but also at their long-term impact on lending, banking-sector stability and capitalisation.
In total, our team analysed more than 50 cases of elevated bank taxation worldwide over the past 25 years. In virtually every case, actual revenues fell well short of expectations. Long-term losses to banking systems, meanwhile, are concentrated where the tax burden was heaviest — and they dwarf the short-term fiscal gain.
In this paper we examine the five most telling examples in detail: Poland, Romania, Hungary, Italy and the United Kingdom — ranging from the harshest levies on bank assets to the British counter-example, where the bank tax was ultimately cut to preserve the competitiveness of the financial centre.
In Hungary, the “temporary” tax on bank assets introduced in 2010 is still in force. Since 2022 it has been joined by a separate windfall profits tax, which is likewise extended year after year. As early as 2010, the IMF called the Hungarian levy “disproportionately large: more than three times higher than the largest comparable levy” and, for less profitable banks, “a de facto expropriation of capital”. Lending to the economy fell from 60 to 30–35 per cent of GDP and shows no sign of recovery.
In 2022, hit by the tax and by war-related risks, the price-to-book ratio of OTP, Hungary’s largest bank, fell from 2.1 to below 0.8 — meaning the market valued the bank at less than its own equity.
Poland introduced a similar tax on bank assets “on top of” corporate income tax. Tadeusz Białek, president of the Polish Bank Association, said the tax had steered banks away from lending to the economy and towards tax-exempt government bonds. In the first years after its introduction, sector return on equity hovered around 7 per cent, while corporate lending fell to a historic low of 12 per cent of GDP. The share of foreign capital in the sector fell from about 60 to below 50 per cent over the years the tax has been in place. Moreover, according to the National Bank of Poland, banks passed the tax on to customers: mortgage rates rose and rates on corporate deposits fell. The tax is estimated to have shaved a cumulative 3.6 percentage points or so off Poland’s GDP growth.
In Romania, the mere surprise announcement of a “greed tax” triggered a market rout: the banking index lost about 11 per cent in a single day — its worst session since the 2008–09 crisis — shares of the largest banks fell 17–20 per cent, and the leu dropped to record lows.
The British case is telling for a different reason. Even a small levy on bank balance sheets became a problem: in 2015, HSBC’s threat to move its headquarters out of the City of London forced the government to halve the levy rate and restructure its base. And in 2023, while continental Europe was introducing new bank taxes, the UK went the opposite way — cutting the surcharge on bank profits from 8 to 3 per cent to protect the competitiveness of its financial centre. Britain knows the cost of banking instability: the bailout of RBS — now NatWest — ultimately cost taxpayers about £10.5bn.
In Italy, the one-off 2023 “super-tax” was a fiscal failure: almost all large banks opted instead to set aside 2.5 times the amount due in non-distributable reserves, so the budget received next to nothing in cash against a planned €3bn or so. The market reacted instantly: on the day of the announcement the banking sector lost about €10bn in market value, and the government had to hurriedly water down the tax.
We also examine in detail the actual fiscal effect of the “super-tax” on Ukrainian banks.
To recap: the 50 per cent rate on bank profits has been applied three times — to 2023 and 2024 profits (both retroactively) and, for the first time prospectively, to 2026 profits; in 2025 an elevated standard rate of 25 per cent applied, against 18 per cent before the war.
In none of these years was the money critical to the budget. Even in the 50 per cent years, the extra revenue was about UAH39bn–48bn a year — 1–1.5 per cent of state budget revenue. The finance ministry expects about UAH30bn from extending the higher rate into 2026 — roughly 1 per cent of planned revenue.
Moreover, it is ultimately customers rather than banks who bear most of the cost: a classic study by Bank of Italy economists Ugo Albertazzi and Leonardo Gambacorta, using eurozone data, found that banks pass up to 90 per cent of a bank profit tax on to customers — primarily through lending rates.
Four years of elevated bank taxation have steadily eroded the foundations for growth in the financial sector. The NBU estimates that UAH20bn in expected additional tax revenue costs the economy UAH200bn–300bn of loans that the banking system will be unable to extend in the coming years.
Lending to the private sector in Ukraine remains the lowest in Europe at 18.2 per cent of GDP (2024), and the loan-to-deposit ratio is just 35–37 per cent. Although lending is recovering and the NPL ratio has fallen to its lowest level since 2009 (12.9 per cent), the heavy tax burden and unpredictable tax rates (Draft Law No 15262 provides for extending the “bank super-tax” into 2027) are holding back capital accumulation and banks’ willingness to lend to the economy.
“Given the reintroduction of this tax, this measure entrenches economic distortions, encourages counterproductive behaviour aimed at minimising the tax burden, and constrains banks’ ability to build capital to support lending and post-war recovery,” the IMF said of the “super-tax” in its latest review of Ukraine (Country Report No 26/188, July 2026).
For an economy that will have to finance its own recovery, this makes particularly little sense. Bank capital is one of the few domestic resources that can be leveraged many times over into lending to the private sector. Withdrawing it gives the budget immediate revenue, but at the same time reduces the financial system’s future capacity to create assets and lend to businesses.
The question, therefore, should not be framed as a choice between a “tax on banks” and “forgoing budget revenue”. It is a choice between a short-term fiscal effect and long-term economic returns. A few tens of billions of hryvnias more are not critical to the budget; bank capital, by contrast, is critical to lending, recovery and growth. In wartime and during subsequent reconstruction, elevated bank taxation is economically justified only as an exceptional and genuinely temporary measure. Entrenching it as a permanent source of revenue risks draining from the banking system precisely the capital the economy will later need.
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