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EU Loses Top Court Fights With Hungary, Poland Over Taxes

Bloomberg logo Bloomberg 3/16/2021 Stephanie Bodoni
people walking on a city street: Pedestrians pass operating food outlets and shuttered retail stores in Wroclaw, Poland. © Bloomberg Pedestrians pass operating food outlets and shuttered retail stores in Wroclaw, Poland.

(Bloomberg) -- Hungary and Poland won the final round of separate tax disputes with the European Union after the two nations were caught up in EU Competition Commissioner Margrethe Vestager’s crackdown on allegedly unfair fiscal arrangements.

The EU Court of Justice on Tuesday rejected the European Commission’s appeal of a lower court ruling that upheld Hungary’s advertising tax. EU judges also said Poland’s lower tax rates for smaller retailers shouldn’t be seen as illegal state aid.

Hungarian Prime Minister Viktor Orban initially levied the ad tax in 2016 by imposing a rate of as high as 50% of sales on the biggest networks. RTL Klub, the country’s most-watched commercial TV channel, called it a “brute attempt to ruin” one of the last independent media outlets. Following EU criticism, Hungary capped and gradually lowered the tax rate before pledging last year to suspend it altogether through 2022.

The EU in 2017 came to a similar conclusion regarding a Polish retail tax, saying it unfairly provided companies with lower sales an advantage over bigger rivals.

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“Once again, Hungary was proved right in deciding on this form of taxation for strongly capitalized international companies,” Justice Minister Judit Varga said in a Facebook post after the ruling. The court “made clear that revenue-based, progressive taxes such as the advertisement tax meet EU legal requirements,” Varga said.

The Brussels-based commission said it will study the rulings.

The cases are: C-562/19 P, Commission v. Poland, C-596/19 P, Commission v. Hungary.

(Updates with Hungary, EU reactions in last two paragraphs)

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