TAXATION : COMMISSION MAY INITIATE PROCEEDINGS AGAINST BUDAPEST.

The European Commission is currently examining the compliance with EU legislation of the 'crisis taxes' introduced by Hungary on businesses in the agro-food, energy, telecommunications and retail distribution sectors. Its investigation, which began on 20 December 2010, rests upon a complaint by thirteen European businesses as well as upon a letter from the Hungarian government. If it turns out that Budapest has failed to comply with EU rules and its principle of tax equality, according to which it is not possible to tax operators in one sector more than those in another, the Commission could open formal proceedings.

The text of the Hungarian law anticipates exceptional taxes with regard to large businesses in the agro-food, telecommunications and retail distribution sectors - the majority of which are subsidiaries of large foreign businesses - in the hope of bringing the country's budget deficit below 3% of GDP in 2011. The objective, according to Prime Minister Viktor Orban's new government, in power since June 2010, is to fill the gap of HUF500-700 billion (1,810-2,534 billion) left by the former Socialist government, in particular via temporary and proportionate measures for businesses.

"While the Commission has no problem with the budgetary and fiscal choices made by member states to consolidate and balance the budgetary situation, principles exist in terms of fiscal equality," recalled a spokesperson for the...