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European Commission refers Hungary to European Court of Justice over telecoms tax

European Commission refers Hungary to European Court of Justice over telecoms tax

The European Commission has referred Hungary to the European Court of Justice for failing to end a special tax on the turnover of telecommunications operators. The tax in question was introduced in October 2010 in response to the economic crisis of the country.

The telecoms tax is part of a tax on the three major sectors of the Hungarian economy: retail commerce, telecoms and energy. The rate of the charge levied on telecoms operators varies between 0% and 6.5% and is calculated on the basis of gross revenues.


Tax in violation of EU legislation

The European Commission considers the tax in violation of EU legislation, as the EU Authorisation Directive allows charges on telecoms operators only when they are imposed in order to cover certain administrative and regulatory costs, and not to generate additional revenue for the central budget.

With the Hungarian telecoms tax, the amount of budgetary revenue generated exceeds over 200 million EUR per year, reports the Commission. Moreover, the tax increases the financial burden on telecoms operators and could as such create a considerable obstacle to the achievement of the Digital Agenda objectives by impacting consumer bills, distorting competition and impeding investment in the sector.

Hungary has also failed to comply with its obligation under EU law to consult interested parties on any amendments of charges applied to telecoms operators.

In response the European Commission had opened infringement proceedings against Hungary’s telecoms tax in March 2011. In September 2011 the Commission formally asked the Member State to end the tax, giving Hungary two months to inform the Commission of measures taken to comply with EU telecoms rules.

As no such notification was given, the matter has now been referred to the European Court of Justice.

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