Top international banks have written letters to the IMF and the Hungarian government protesting Budapest's plans for a banking tax, the Austrian daily Der Standard reported yesterday.

Austrian banks Raiffeisen International and Erste Group Bank and their Dutch, German and Italian counterparts, KBC, UniCredit, Intesa Sanpaolo and BayernLB, all have subsidiaries in Hungary, where the new centre-right government is planning a 0.45 per cent tax on banks' total net assets to help plug the gap in Hungary's state finances.

The tax will not just affect banks, but the financial sector as a whole, with insurers having pay as much as 5.2 per cent.

Prime Minister Viktor Orban and his centre-right Fidesz party, which swept to power in April, estimate the measure could raise up to €650 million in additional annual revenues both this year and next year.

But the tax is much steeper than in other countries - in Austria, there is talk of a tax of 0.07 per cent, while in the United States, President Barack Obama has suggested a levy of 0.15 per cent.

The banks have written both to the International Monetary Fund and to Budapest to complain "bitterly" about the plans, Der Standard reported.

And the newspaper said the letters even suggested the banks could rethink their investments in the region if the tax is pushed through.

As part of a strategy to help stabilise eastern Europe in face of the global financial crisis, foreign banks originally pledged not to scale back their investment in the region.

"But how can we maintain our investment at pre-crisis levels in the face now of such heavy burdens," the newspaper quoted a spokesman from a major Austrian bank as saying.

Hungary narrowly escaped bankruptcy in late 2008, thanks to a €20 billion financial lifeline from the IMF, the World Bank and the EU.

That agreement is scheduled to expire in October, but Budapest has signalled it wants to negotiate a new loan from the IMF starting next year.