EU approves local business tax (hipa)

Issues

According to the decision of the European Court of Justice, the Hungarian local business tax (hipa) is not in conflict with EU Directives.

This decision was made on the request of two Hungarian courts after several companies turned to them asking for a ban of the tax. They claimed that hipa tax was in conflict with the Sixth VAT Directive, which says that a member state can only levy one value-added type of tax.

But, according to the European Court, there are major differences between the hipa and value-added taxes. Hipa is based on the total income of a company instead of the added value and it is paid by the company instead of the consumer. The local business tax is imposed by the municipalities and they have about Ft 400 billion income from it in a year. (Napi Gazdaság, Gazdasági Rádió, Magyar Hírlap)

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