EC drops legal action against Magyars’ ‘special tax’

24 Jul 2013

The European Commission (EC) has ditched plans to take legal action against the government of Hungary’s special tax on its domestic telecoms sector, ending a dispute with Budapest that dates back to 2010 and Prime Minister Viktor Orban’s so-called ‘crisis taxes’. The Commission had repeatedly told Hungary to revoke the controversial tax measures, which it claimed were contrary to European Union (EU) law. However, it has been forced to climb down following an unfavourable ruling from the European Court of Justice in a similar case involving France.

TeleGeography’s GlobalComms Database notes that in March 2011 the EC launched an infringement procedure against Hungary over the matter, noting its concern that ‘the special tax on telecom operators is levied to cover costs other than administrative and regulatory costs related to the telecoms sector and is therefore incompatible with EU telecom rules’. The Commission subsequently racked up pressure over the contentious telecoms tax and in March 2012 said it was looking to refer the matter to the European Court of Justice. Then in November 2012 the Hungarian government abandoned plans to implement another ‘crisis tax’ on the retail and telecoms sectors that it had planned to bring in from January 2013. Amid EU calls for them to be scrapped, Budapest issued a statement saying: ‘The Hungarian government, independent of this [EU] request and acting on an earlier decision, will stop in its entirety the temporary special taxes levied on certain sectors – retail and telecommunications – from 1 January 2013’. The move came hard on the heels of an EC call for Hungary to amend the special taxes, which it called ‘discriminatory’ as they might ‘disproportionately affect’ non-Hungarian operators. The EC gave Budapest two months to comply with EU law in this area, adding that failure to do so would result in infringement proceedings, including the matter possibly being brought before the Court of Justice. Budapest was later given formal notice of its intention to commence a second infringement proceeding, while the ruling on the EC’s previous objection to Hungary’s special telecoms tax was still pending a decision from the European Court of Justice. However, it appears that the EU has now backed down.

Had Budapest lost the case, it would have been forced to pay back about HUF180 billion (USD814.9 million) collected in special taxes between 2010 and 2012. The government has however, always maintained its position that the ruling did not apply, as the levy it imposed was in the form of a tax, not an administrative charge.

Hungary,

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