By Margit Feher
BUDAPEST--The European Commission has launched two separate
probes into Hungarian special taxes, on suspicion that they benefit
small, mostly domestically owned firms at the expense of large,
mostly foreign-owned companies.
The Commission is scrutinizing the food inspection fee, as well
as a levy on sales from tobacco production and the trade of tobacco
products.
Since coming to power in 2010, Hungary's governing Fidesz party
has enacted policies that overwhelmingly hit foreign-owned
businesses, imposing special taxes and seeking to reclaim ownership
of certain industries, such as banking and power generation.
In a release issued on Wednesday, the Commission, the European
Union's executive body, expressed concern that these latest
measures benefit firms with a low revenue over competitors with a
higher turnover, in breach of EU state aid rules. The statement
didn't mention the possible ownership of the firms involved.
The Commission has also prohibited Hungary's government from
applying the progressive rates of the food chain inspection fee and
also the tobacco tax until its investigation is concluded.
Under an amendment to the food inspection fee, effective from
the start of this year, stores with a low annual turnover are
exempt from the tax, or liable for a substantially lower fee--0.1%
of their annual revenue--than stores with a higher annual turnover,
which are obliged to pay up to 6%.
According to calculations in December by Hungarian fiscal
watchdog KFV, the local arms of U.K. retailer Tesco PLC (TSCO.LN),
the biggest food retailer in Hungary, and SPAR International,
headquartered in the Netherlands, would pay more than two-thirds of
the tax.
"So far, Hungary has provided no objective reasons that would
justify such differentiated treatment between companies for
different turnovers [in either case]," the commission said.
In 2015, Hungary introduced a steeply progressive new tax on the
sale of tobacco products, referred to as a health contribution.
"The Commission welcomes member state measures to reduce tobacco
consumption. However, it has doubts that the effects of tobacco
products on public health increase progressively with the turnover
of companies selling them," the statement said.
In response, members of the Fidesz party have urged the
government to defend the special taxes, saying the extra levies
will be used to protect food quality and build a new hospital in
the capital.
Hungary's special taxes are levied on sectors that make "extra
profits" and result in a "more equitable" burden sharing, Fidesz
said in a release.
"Brussels, instead of protecting the interests of Hungarians, is
guarding again those of the foreign multinational firms," the party
said.
Write to Margit Feher at margit.feher@wsj.com; Twitter:
@margitfeher