Hungarian tobacco retail business investigated

An investigation of Hungary’s central tobacco distributing company by the European Commission (EC) is taking more time than it was originally expected, but it is not by chance the EU executive is taking its time to look into the matter, portfolio.hu quotes a local paper.

Quoting the Hungarian business daily Világgazdaság, the financial website writes that the Commission is no longer interested merely in how the National Tobacco Supplier operates, but how the entire cigarette trading system works, including the scandals related to the national tobacco shops.

In mid-July this year, the European Commission opened two separate in-depth investigations to further examine whether two recent Hungarian measures with steeply progressive rate structures are in line with EU state aid rules. The first measure concerns a food chain inspection fee and the second a tax on turnover from the production and trade of tobacco products. The EC had concerns in both cases that the progressiveness of the rates based on turnover provides companies with a low turnover a selective advantage over their competitors, in breach of EU state aid rules.

The Commission also issued injunctions, prohibiting Hungary from applying the progressive rates of the food chain inspection fee and the tobacco tax until the Commission has concluded its assessment.

At the end of October, János Lázár, the Prime Minister’s chief of staff, announced that a new special levy will be imposed on local tobacco producers to offset the impact of the EU decision. This will be an additional tax burden of HUF 4 per cigarette on certain types of cigarettes.

The EC signalled in July that a newly established central tobacco distributor was also the subject of the probe.

The National Tobacco Supplier Ltd. is a company granted concession by the state with an exclusive mandate to distribute tobacco products to retailers. It has been up and running since November 1.