EC tasks Hungary over controversial telecoms tax

30 Sep 2011

The European Commission (EC) looks set to go toe-to-toe with the government of Hungary over a controversial tax Budapest has imposed on domestic telecoms operators, which the Commission deems illegal. Dow Jones Newswires writes that the EC has ordered the Hungarian government to abolish the tax it introduced in October last year, or face legal proceedings in Europe’s highest court. The Magyar administration ushered in a levy on the telecoms, banking, retail and energy sectors to shore up its revenues in the midst of a sharp economic downturn. Under the plan, telcos would contribute around HUF60 billion (USD280.4 million) per annum – or 0.2% of gross domestic product (GDP) – but under EU law, such a tax can only be used to meet specific costs related to the regulation of the telecoms sector. ‘What we’re talking about here is a tax levied directly on the revenue of the telecoms companies, and it’s a direct tax with the revenue going straight to the Hungarian government’s budget,’ Neelie Kroes, a spokesman for EU commissioner for the digital agenda, told reporters, adding: ‘It’s therefore illegal, in our view.’

In response, a spokesman for the Prime Minister’s office, Peter Szijjarto, said: ‘We see no reason to make changes and we are prepared for the dispute on the matter with the European Commission.’ In the meantime, the controversial tax continues to affect four of Hungary’s providers – Magyar Telekom, Vodafone Hungary, Telenor Hungary and Liberty Global Inc’s local unit UPC Hungary. The government now has two months to let the EC know it has put in place measures to comply with the ruling, or face the threat of legal action in the Court of Justice.

Hungary