* New real-time tracking system designed to combat tax fraud
* But companies say it is damaging, excessive bureaucracy
* Chancellor Merkel due to visit Budapest early next month
By Gergely Szakacs
BUDAPEST, Jan 22 (Reuters) - A Hungarian transport tracking system to combat tax fraud has annoyed businesses, including German companies which complain it creates extra bureaucracy and will harm the economy.
Prime Minister Viktor Orban's government, which has a track record of policies that have upset its European Union partners, says the tracking system is needed to clamp down on tax fraud, such as fictitious transport activity.
The system allows the tax authority to collect over a dozen types of data, such as gross weight and product prices, on each delivery transported on Hungarian roads.
Weeks before a visit by Chancellor Angela Merkel, the German trade chamber complained.
"The EKAER system has a disproportionately large, damaging effect on the Hungarian economy," it said. "Hungary is experiencing a tangible loss in competitiveness as a manufacturing and logistics base compared to other regional countries."
Those violating the rules face fines from March.
The Organisation for Economic Co-operation and Development warned Hungary last year against too much red tape.
"To be in line with all legal needs, from February, we will need to hire about 10 people ... who will do nothing else all day but handle the data", Arpad Vasarhelyi, head of DB Schenker Logistics in Hungary, told Reuters.
He said the system would hurt suppliers in the car sector, a major contributor to growth.
Faced with the complaints, the Economy Ministry said on Thursday it would extend the "test phase" of the project by a month, adding that it would look into whether any modifications were justified.
Daimler AG, which invested 1 billion euros ($1.2 billion) into its Mercedes factory in Kecskemet, said it supported government efforts to curb tax fraud, but added: "We still see significant potential for improvement regarding the introduction of the new EKAER regulations." ($1 = 0.8603 euros) (Reporting by Gergely Szakacs; Editing by Ruth Pitchford)