spiritsNEWS June 2016

Hungary - infringements proceedings against discriminatory Health Tax

In 2014, the European Court condemned Hungary for the application of excise taxes that discriminated against most imported spirits and protected the national fruit spirit, Palinka.  In amending national legislation to take account of the ruling, however, Hungary introduced new provisions that, in many ways, extended the previous discrimination within the spirit drinks sector. 

 

In essence, Hungary extended the coverage of its existing ’Health tax’ so as to include spirits.  However, it added provisions so that Palinka and any spirit containing at least 7 herbs (which includes the important ‘bitters’ category made in Hungary) would be exempt from the application of the health tax.  There is no justification whatsoever for discriminating in this way: all spirits (and indeed all alcoholic beverages) provide health benefits consumed in moderation; all can cause damage when misused. 

 

For most internationally traded spirits, the new tax added a significant fiscal burden.  On whisky, for example, the effective tax rate rose by over 50%.  The spirits sector submitted a formal complaint to the Commission at the new measure which maintained discrimination between competing products, even in the face of the earlier ECJ ruling.  Following an investigation, the Commission opened infringements proceedings against Hungary.  This was very welcome.  With the Commission’s letter of formal notice having now been sent to Hungary we hope this will lead to the removal of this discrimination within the single market. 

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