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Newsalert
EU Direct Tax Group
6 July 2016
Commission finds Hungarian food chain
inspection fee and tobacco sales tax in breach of
EU State aid rules
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For more detailed information,
please do not hesitate to contact:
Gergely Juhász
PwC Hungary
+36 1 461 9359
[email protected]
Sjoerd Douma
Chair, PwC’s State Aid Working
Group
+31 887924253
[email protected]
On 4 July 2015, the European
Commission (EC) issued its final
decisions regarding the in-depth State
aid investigations into the Hungarian
food chain inspection fee and tobacco
healthcare contribution (case numbers
SA.40018 and SA.41187 respectively).
The decisions are not yet published, only
the EC’s Press Release is available, hence
the below is based on that.
Background
On 15 July 2015, the EC adopted two
separate suspension injunctions, in
which it prohibited Hungary from
applying the progressive rates of the food
chain inspection fee (Food Chain
Inspection Fee) and the tobacco
healthcare contribution (Healthcare
Contribution), and initiated formal indepth State aid investigations into these
measures. Pursuant to the suspension
injunctions Hungary has suspended the
collection of the respective fee and tax –
both of which were in effect in such form
from early 2015 – and, in respect of the
Food Chain Inspection Fee, it abolished
the progressive tax schedule effective
from December 2015.
Hungary introduced the Food Chain
Inspection Fee to cover the sanitary
inspections costs, while the Healthcare
Contribution was meant to reduce the
negative effects of tobacco products on
public health and the expenses of
operating public healthcare.
In respect of the objectives pursued by the
measures, the EC notes that Hungary
failed to demonstrate that:

in the case of the Food Chain
Inspection Fee, the progressive rate
structure corresponds to a similar
progressive pattern in the costs
incurred by the agency for the
inspection of the relevant stores; and

in the case of the Healthcare
Contribution, the effect of tobacco
products on public health increases
proportionally with the turnover of
the companies selling them.
In the case of the Healthcare Contribution
the EC points out that the possibility to
reduce the contribution burden with
eligible investments, that may well
increase production, appears to be
inconsistent with the aims pursued.
No recovery was ordered, as due to the
suspension of the measures no State aid
was effectively granted.
Potential implications
It is yet to be seen whether Hungary will
appeal the EC’s decisions, especially given
that the Healthcare Contribution is still in
effect (though suspended), and given that
there are and were other Hungarian
measures that operate/operated with
arguably steep progressivity.
The EC’s decisions
Or contact any of the other
members of PwC’s State Aid
Working Group, or your usual PwC
contact
The EC has now issued its decisions in
respect of the two Hungarian measures.
It concludes that the progressive tax
schedules of both measures are
incompatible with the EU State aid rules
as they provide a de facto selective
advantage to certain group of companies
(those with low turnover), and this
selective advantage is not justified by a
legitimate objective pursued by these
measures.
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