Hungary Falls Out With Brussels Over Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

14 November 2002

With time running out before December's EU summit in Copenhagen, Hungary has run into a last minute row with the European Commission over tax breaks afforded to foreign businesses.

According to a Financial Times report published this week, the EC wants the Hungarian government to convert tax breaks offered to companies such as General Electric, Sony, and Volkswagon into forms of aid compatible with EU rules. Although Hungarian officials have said that they are trying to find a compromise which is acceptable to both their multinational investors and the European Union, things have not been progressing fast enough for the Commission's liking.

The FT revealed that: 'The disagreement is delaying closure for Hungary of the negotiating chapter on competition policy, one of the most sensitive parts of the EU rule book. The EU hopes to finish accession negotiations for all the candidate states before next month's EU summit in Copenhagen.'

Of the other pre-accession candidates, only Poland also still needs to close the competition policy chapter. However, according to reports, the problems being experienced by Poland are mainly technical, whereas with Hungary, there is a fundamental disagreement between the two sides.

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