The European Commission (EC) is expected to refer the government of Hungary to the European Court of Justice over its controversial special telecoms tax. Budapest’s relationship with Brussels has been strained since Hungary introduced the measure in 2010 to try to reduce its budget deficit and Reuters reports that it has seen documents that show Hungary will be referred – having twice failed to respond to requests to bring its tax legislation into line with EU law – and could ultimately face ‘severe fines’ if it does not toe the line.
TeleGeography’s GlobalComms Database writes that in September last year the EC ordered the Hungarian government to abolish the tax or face legal proceedings. The Magyar administration had 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 at the time, adding: ‘It’s therefore illegal, in our view.’