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Crisis tax on Hungarian unit was “cold shower” for Deutsche Telekom

We understand and accept that countries in difficult positions are forced to take painful steps, but the extraordinary tax introduced on telecommunications companies by the Hungarian government, without any preliminary notification, was like a “cold shower” for us, Deutsche Telekom board member Guido Kerkhoff told MTI.

Magyar Telekom, Deutsche Telekom's unit in Hungary, said earlier it expects to pay HUF 27.5 billion on the “crisis tax” this year. The tax was introduced, together with extraordinary taxes on the retail and energy sectors, by the government in October, with retroactive effect back to the start of 2010.

Deutsche Telekom is especially aggrieved that most of the companies the tax affects are foreign owned and that it has retroactive effect, Kerkhoff said.

The tax will eat up 42% of Magyar Telekom's operating profit this year, he said. Over five years, the company will pay €400 million on the tax, or about 16% of its market capitalization, he added.

Kerkhoff noted that Deutsche Telekom had used Hungary as a base for expansion into Macedonia and Montenegro, but could stop the practice because of the tax. “Investment volume depends on profit, and that has fallen significantly,” he added.

Deutsche Telekom will consider legal recourse after the Hungarian government delivers its stand on the matter as requested by the European Commission, he said. “What those steps will be exactly, I'll leave it to the lawyers,” he added. (MTI – Econews)