Hungary has still no intention to amend the regulation on excise tax and the sectoral extra tax. According to the official position of the government, the Hungarian provisions of law disputed by the Commission comply fully with community law.

The European Commission condemns in the two procedures launched with regard to sectoral extra taxes – the sectoral extra taxes payable by the retail and telecommunication sectors – that the regulation discriminates taxpaying entities which are not Hungarian-owned as instead of profits sales revenues constitute the tax base, and the rate of tax is progressive, therefore foreign-owned companies pay most of the tax.

According to the official position of the Hungarian government, if taxation is based on sales revenues it sufficiently reflects the financial strength of the companies at issue. Contrary to the argument of the Commission, it is not discriminatory that taxes are mostly paid by foreign-owned companies as these enterprises represent a significant weight in the sectors involved, moreover, in the entire Hungarian economy. 

In addition, the European Commission also objects to the regulation regarding the tax exemption of pálinka (fruit distillate) production by households; in their view the exemption runs counter to EU law.

Without a doubt, on the basis of historical traditions, pálinka production has been part of the cultural heritage of Hungarians. Therefore, similarly to other EU countries, Hungary intends to secure the survival of this tradition. Consequently, the government established – by having abolished the alcohol production duty – the right to pálinka brewing of households. This way Hungary aims for nothing more than what is legally due to several EU member countries such as Austria and Germany.

Considering the above, Hungary is prepared to defend its official position in all three infringement procedures at the European Court of Justice.

(Ministry for National Economy)