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European Commission refers Hungary to ECJ for tax rule violation

The European Commission [official website] on Thursday referred Hungary [press release] to the European Court of Justice (ECJ) [official website] for violations of EU rules related to the taxation of telecommunications operators. Article 12 of the EU's Authorisation Directive [text, PDF] contains specific rules for member nations regarding the administrative charges a state can impose on telecommunication network and service providers. Hungary introduced its "crisis taxes" in 2010 in an effort to improve the country's budget revenues. The Commission maintains that these taxes are illegal because member nations are not permitted to implement such taxes for the purpose of raising revenues to reduce the national deficit. Furthermore, the Commission indicated that "increasing the financial burden of telecoms operators could have an impact on consumers' bills, distort competition and impede investment" in the telecommunications sector. The Commission also alleges that Hungary's failure to consult with interested parties prior to implementing the taxes constitutes a violation of EU law.

This is not the first time the European Commission has referred a nation to the ECJ for imposing unlawful taxes. The Commission referred Spain and France to the ECJ for similar violations in March 2011. That same month, the Commission began proceedings against Hungary in relation to the tax and formally asked Hungary to abolish the taxes [EU press releases] in September. The National Assembly of Hungary [official website, in Hungarian] passed a bill in November 2010 limiting the jurisdiction of the Constitutional Court on state budget and taxation matters, effectively eliminating the court's ability to examine the "crisis taxes" [JURIST report] imposed on banks, energy companies, foreign retail and telecommunication firms.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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