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Hungary’s retail tax under fire: EU investigates discrimination claims by Austrian government and SPAR
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The European Commission is looking into the Hungarian retail sales tax following complaints from the Austrian government and Spar. They argue that the tax discriminates against foreign companies and breaches EU regulations.
Retail tax unfair? Austria and Spar complains
The tax rate has climbed to 4.5% of revenue, leading to operating losses for affected businesses, according to Portfolio. The European Commission is investigating complaints the Austrian government and Spar raised regarding Hungary’s retail sales tax.
The tax which was implemented in 2020 currently stands at 4.5% of revenue. Spar alleges that this tax unfairly targets foreign-owned retail chains, forcing them to operate at a loss compared to their Hungarian counterparts, who often face lower tax rates between 0-1%.
Austria’s reaction
Hans Reisch, the CEO of Spar in Austria has stated that Hungary’s tax plan puts pressure on foreign companies to run at a deficit because of the low profit margin in the sector compared to the 4.5% tax rate.
The Austrian Ministers of Economy and Foreign Affairs, Martin Kocher and Alexander Schallenberg both expressed their concerns to EU Commission President Ursula von der Leyen. They emphasised that this new regulation could have an unfair effect on foreign retailers and might go against EU market rules.
The European Commission has acknowledged receipt of the complaint and plans to analyse it, while Hungary’s government has yet to respond.
The European Commission has previously criticised Hungarian retail fees as discriminatory which was highlighted in the 2023 Country Report and country-specific recommendations.
The Commission stressed that these extra expenses are putting an unequal burden on the EU’s retail industry and this is being seen as unfair treatment towards foreign operators. Brussels is also looking into another government action about required shop promotions, which Spar has contested through legal steps with the Court of Justice of the European Union.
While the preliminary assessment does not guarantee further action, an infringement procedure may be initiated soon. In this procedure, the Hungarian government would need to defend the law to Brussels and if deemed unjustified, it can lead to the Commission issuing binding recommendations. Failure to comply could lead to the case being escalated to the EU Court of Justice by the European Commission.
“Thirteen months of contraction” – basically says all you need to know. If you want a longer, more objective read, I can recommend this:
https://think.ing.com/articles/hungary-industry-retail-diverge/
Spoilers: the KSH Central Statistical Office (KSH)is more optimistic and the numbers do not quite appear to match.
ING has a fair number of “structurally weaker”, “not a particularly encouraging picture”, “premature to speak of a trend-like and dynamic recovery”, and “concern that has unfortunately…” – etc.