Much to the relief of multinational firms such as General Electric, Sony, and Volkswagon, the European Union last week accepted Hungary's position on tax breaks for foreign investors.
The dispute over the tax concessions had been delaying the closure of the negotiating chapter on competition policy, one of the most sensitive parts of the EU rule book. However, speaking on Friday, Foreign Minister, Laszlo Kovacs announced that Hungary will shift to EU rules with regard to the tax holidays from January 1, 2003, rather than retroactively to January 1, 2001 as the European Commission had initially demanded.
According to the Budapest Business Journal, several of the country's multinational investors lobbied hard for the tax breaks to be allowed to run their natural course, warning that their premature removal could lead to an exodus of businesses from the country, with dire consequences for employment.
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