BUDAPEST, Oct 31 Reuters Hungary has proposed to increase some taxes in line with the July headline inflation rate from 2025, part of wider efforts by Prime Minister Viktor Orban39;s government to plug budget holes as the economy dips back into recession.
Hungary39;s central bank, which was forced to pause interest rate cuts last week amid falls in the forint, has criticised a similar practice of price rises linked to the previous year39;s inflation rate by telecommunications companies and banks, saying it hampered the fight against inflation.
Tax changes submitted to parliament this week showed Orban39;s government proposing to link rises in excise taxes on fuel, alcohol and tobacco with the July annual headline inflation rate of the previous year from 2025.
The proposals include a similar mechanism for taxes on car registration and ownership.
Hungary39;s headline inflation rate ran at 4.1 in July, down from a peak of 25.7 in January 2023, but still slightly above the National Bank of Hungary39;s 3 mediumterm target with a tolerance band of a percentage point on both sides.
The issue is that in case there is another energy price shock and the inflation rate rises back into double digits, then this will have a knockon effect on the inflation rate of the following year, ING economist Peter Virovacz said.
However, he said the new mechanism could help stabilise revenues in the budget, strained by a muchweakerthanexpected recovery from last year39;s downturn and a…