BUDAPEST: The Hungarian Government imposes special taxes on financial institutions, energy service providers, and telecommunications, retail, and advertising companies. These taxes are projected to generate revenues worth 1.9 percent of gross domestic product (GDP) in 2015, of which most will come from financial institutions (1.2 percent of GDP).
In its 2015 Article IV consultation report for Hungary, the IMF said that these sectoral taxes undermine the simplicity and predictability of tax policies, and reduce profitability, with adverse consequences for private investment and growth.
The report also called on the authorities to tackle compliance issues. It said that a reduction in value-added tax (VAT) fraud could potentially raise revenue by 0.9 percent of GDP between 2015 and 2020.The IMF also recommended that Hungary reduce the number of VAT rates from three to two; eliminate corporate income tax exemptions for sports and entertainment; and remove excise exemptions for diesel fuel and tobacco. These measures could raise revenue by 0.2 percent, 0.3 percent, and 0.4 percent of GDP, respectively, over the next five years, it said.
