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Commission refers Hungary to Court for failure to end crisis tax on telecoms

The European Commission said Thursday it had decided to refer Hungary to the EU's Court of Justice because it continues to impose a specific tax on the turnover of telecoms operators in violation of EU rules.

The tax was introduced in October 2010 as part of the "crisis taxes" levied by the Hungarian government on three major economic sectors of the economy -- retail commerce, telecoms and energy -- to improve Hungary's budgetary position. The government plans to phase out the sectoral taxes next year.

The statement said that the Commission considers the tax to be illegal, because EU telecoms rules allow sector-specific charges only to cover the specific costs of regulating the sector, and not to generate additional revenue for the central budget. Increasing the financial burden of telecoms operators could have an impact on consumers' bills, distort competition and impede investment in a sector expected to drive growth under the Digital Agenda. 

Hungary has also failed to comply with its obligation under EU law to consult interested parties in an appropriate manner on any amendments of charges applied to telecoms operators, the EC press release added.

The rate of the charge levied on telecom operators varies between 0% and 6.5%, on the basis of gross revenues (excluding VAT). The amount of budgetary revenue (over €200 million per year) that the tax has started to generate reinforces the distortive effects of this charge, and creates a considerable obstacle to the achievement of the Digital Agenda objectives. 

The Commission opened infringement proceedings against Hungary concerning the telecoms tax in March 2011. It followed this up in September 2011 with a reasoned opinion formally asking Hungary to abolish the telecoms tax.

Commission spokesman Olivier Bailly said at a press conference on Thursday that no financial sanctions on Hungary had been requested of the court.

"There is no request from the impose fines on Hungary," he said.

Responding to a question on the other crisis taxes, on the retail and energy sectors, a Commission spokeswoman said the retail sector tax was still under review and a decision could be expected "in the coming months". She added that no infringement was found in the case of the energy sector tax. "That case is closed, there is no violation," she said.


The National Economy Ministry said after the Commission's announcement on Thursday that the crisis tax on telcos does not infringe on EU rules. It added that the government believes the EU Court of Justice will reject the Commission's referral.