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Audi seeks compensation in Hungary for tax

Volkswagen AG's Audi luxury car unit is demanding the Hungarian government compensate it for a new tax on corporate profits, national daily Népszabadság reported.

A board member of German car maker Audi on Monday said he was certain the Hungarian government would come to an agreement with the company on a dispute over the so-called "solidarity tax" by November 10, when Audi chairman Martin Winterkorn is scheduled to visit Hungary and meet with Prime Minister Ferenc Gyurcsány.
On October 20, Audi said it would suspend preparations to make investments at its unit in Hungary because of the introduction of the solidarity tax. The tax, introduced on September 1, just a few months after it was announced, forces businesses to pay another 4% of pre-tax profits to the state on top of their corporate tax. Revenue from the tax is expected to narrow Hungary's big budget gap. Audi board member Jochem Heizmann, who is also chairman of the supervisory board of Audi's Hungarian unit, told a press conference at Audi's Ingolstadt headquarters that Audi does not question the legitimacy of the solidarity tax, but the company would not like to see the conditions for doing business in Hungary worsen or become more unpredictable. He added that the board supports steps Hungary is taking to reduce its budget deficit. One solution to the problem could be an investment incentive programme which complies with EU rules. Another could be for the government to allow Audi to reduce its tax base for the solidarity tax by its spending on research and development, Heizmann said. R+D investments would be in the interest of both Audi and the state, he said. Heizmann reiterated that Audi is reconsidering planned investments at its Hungarian unit. These include a new tool factory, which could make body parts for Audi's R8 sports car, or assembly of another Audi model in addition to the TT sports car. Audi already owns an 800,000-square-metre plot adjacent to its factory in Győr (NW Hungary) where it could build more capacity, he said. Audi's Hungarian unit was granted a tax holiday when it decided to build its plant in Győr in 1993. In 1999, the centre-right Fidesz government extended the tax holiday until 2011. The exemption was converted into a form acceptable under EU rules when Hungary joined the EU in 2004. Heizmann noted that Audi's plant in Győr is expected to turn out more than 1.8 million engines in 2006. Production of second-generation TT Coupes has already started and production of the new TT convertible model will start soon. (Mti-Eco)