Hungary's government may opt not to drop the bank tax in two years after all if it will be forced to prop up the budget, IMF mission chief to Hungary Christoph Rosenberg told weekly HVG in an interview.
Rosenberg said the bank tax, which he reckoned may still be around in 10 years, cannot serve the basis for a solid fiscal policy. The IMF concluded a series of talks with the Hungarian government in Budapest at the end of last month and raised several concerns over the government's fiscal plans, Rosenberg said. Among these are worries that Hungary's tax load will not decrease as the government originally planned due to the bank tax and the extra levies on the energy, telecom and retail sectors. These taxes may also stifle investments, employment and economic growth, and will probably put a strain on households as taxed companies will scramble to pass on extra costs to consumers. The IMF also has concerns that flat taxation may not be the best way to boost the country's competitiveness and its positive effects on the economy are often overrated. Hungary's government is also overly optimistic about the country's growth prospects, which do not solely depend on domestic demand but also on world markets, which have shown little signs of growth, Rosenberg said. (BBJ)