Spar Challenges Hungarian Government Tax Move

The supermarket chain Spar is to complain to the European Union about a special tax in Hungary, a Financial Times (FT) report is quoted by the Hungarian financial portal portfolio.hu.

Spar has accused the Hungarian government of breaking EU law and called on Brussels to intervene to mitigate the "devastating" effects on its operations. The group claimed that the special tax ('extra profit tax') introduced by Prime Minister Viktor Orbán's government in 2022 was discriminatory and breached a number of EU laws, including those on the free movement of goods.

Spar also criticizes the extra tax and the Hungarian government's introduction of a price freeze on a range of food products. The latter measure also forced shops to sell several products at prices lower than those at which they were purchased. Spar criticizes the fact that some of the measures have remained in force even though inflation has fallen significantly.

In its complaint to the EU, Spar claims that the measures in question are clearly incompatible with EU law. According to the complaint, which was obtained by the Financial Times, the government's intervention has increased Spar's costs by around EUR 90 million and caused the company to make a loss of nearly EUR 50 million in 2023.

Spar is the second largest retailer in Hungary by turnover. Viktor Orbán has long blamed foreign companies for higher food prices, claiming last year that they had "raised prices more than justified", the FT writes. Portfolio has also argued in several articles that the blame for the price rise lies not with retailers, but rather with the rising cost of raw materials and the inefficiency and uncompetitiveness of the food industry. And of course, the fall in the value of the Hungarian currency, the forint, which has made imported products more expensive.

Under the new system introduced by the government, retailers must offer at least one product from a list of 20 categories - including fish, poultry, eggs and coffee - at a 10% discount on the average price of the previous 30 days. This is the system of mandatory promotions. Spar complains that the government's measures upset the balance of supply and demand in the agricultural and food markets, discriminatorily allowing small independent retailers and franchisees to avoid such losses.

The Hungarian government did not respond to a request for comment on Spar's complaints, but the European Commission declined to comment. FT notes that since coming to power in 2010, Viktor Orbán has repeatedly resorted to unorthodox taxation, previously targeting the financial services, energy and telecoms sectors.