EC: Hungary canʼt implement supermarket, tobacco taxes

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Hungary’s proposed supermarket oversight fee and tobacco tax, both based on a progressive rate tied to turnover, are in breach of the European Union’s state aid rules and therefore should not be reinstated, the European Commission said yesterday in a press statement.

Both of these taxes have been suspended during a year-long investigation by the EC, and the ruling apparently means that they will not be brought back into effect. It was not clear from the statement whether the Hungarian government can appeal the decision.

According to yesterday’s statement, the EC established that “the progressive tax rates grant a selective advantage to companies with low turnover over their competitors”. In effect, this means that the state would be subsidizing the advantaged companies, the statement said.

“Hungary should make sure that all companies are treated alike so that the (tax) contributions are levied on non-discriminatory terms,” EC Competition Commissioner Margrethe Vestager said, according to the statement.

The EC noted that, after it launched an in-depth investigation into the matters in July of last year, neither tax was collected by the government. “Consequently, there is no need for recovery in these cases,” the EC says in the press statement.

The EC stressed it “does not question Hungaryʼs right to decide on its taxation levels or the objective of different taxes and levies. However, the tax system should respect EU law, including state aid rules, and should not unduly favor a particular type of company, for example companies with lower turnover.”

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