British retail chain Tesco is challenging Hungary in the European Court of Justice (ECJ) over the government’s previous collection of extra taxes from the company, with Tesco demanding the partial reimbursement of the 85.9 billion forints (€254.9 million) it paid over between 2010 and 2012.
A ruling in the case is now expected on March 3.
When the conservative Fidesz won the 2010 elections and came to power in May 2010, Hungary was struggling with a huge budget deficit, mounting public debt, high unemployment, and a stagnating economy.
In order to fill at least part of the gaps in the budget, the government levied progressive extra taxes on the companies with the biggest revenues in the retail, energy, banking, and telecommunications sector in October 2010, which remained in effect until the end of the budget year in 2012.
Over the two years and two months, total budget revenues from this tax amounted to 489 billion forints (€1.45 billion at current exchange rates).
Tesco is arguing that by levying the tax only on the companies with the biggest revenues, the Hungarian state was in fact shielding smaller domestic retail chains but punishing the biggest ones. The company is now seeking the reimbursement of about 40 percent of the taxes it paid between 2010 and 2013.
Another British company, telecommunications giant Vodafone, also challenged the tax back in 2018 and the ECJ is expected to make ruling on both cases in March. Preliminary indications are, however, that the tax will be upheld by the court.
Last June, ECJ chief counselor Julianne Kokott said that the extra tax on telecommunications challenged by Vodafone was not contrary to EU legislation for three reasons.
First, it did not contravene the VAT directives and second it was in line with the free business principle. Finally, it did not provide smaller companies with a selective advantage that would go against the interdiction of selective state subsidies.
Title image: Tesco sign in Budapest (Magyar Nemzet/Miklós Teknős)