As some discerning analysts predicted, the bank tax was not the end-point but the beginning of a process wherein the government turns to certain corporate sectors to cover the budgetary shortfalls. Critically as economists might see it, politically the solution seems astute in light of the real world constraints facing the government.
To push the deficit to under 3%, the cabinet has decided to hit three further industries – telecommunications, retail and energy – with new levies totalling 160 billion forints per annum for three years, starting in 2010. Since these industries have reaped superprofits, the government argues, it is time to give something back.
For a while, the situation looked insoluble. Fidesz had to square obligations that were obviously at odds with each other and it looked highly unlikely that any set of measures would successfully meet all these requirements.
Orbán appears to believe that credibility is – for now – the most important aspect of his hold on power, so he cherishes it even as it imposes a straitjacket on his policy alternatives. In the current context, the EU budget constraint and the integrity imperative compelled Fidesz to find a solution that would help lower the deficit without effecting a significant change of the course charted over the past years.
Policy Solutions' analysis on the Orbán Cabinet's new tax measures on multinational companies can be downloaded from here.
Policy Solutions is a progressive political research institute based in Budapest. It was founded in 2008 and it is committed to the values of liberal democracy, solidarity, equal opportunity, sustainability and European integration. The focus of Policy Solutions’ work is on understanding political processes in Hungary and the European Union. Among the pre-eminent areas of our research are the investigation of how the quality of democracy evolves, the analysis of factors driving euroscepticism, populism and the far-right, and election research.
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