Hungary Approves Special Tax on Energy, Telecoms, Retail, Allows Deduction

Hungarian lawmakers approved a special tax on the energy, telecommunication and retail industries, allowing companies to deduct the levy from their income tax.

Lawmakers voted 294 to 44 with 12 abstentions late yesterday in favor of the measure, according to the Parliament’s website. The tax, together with a previously announced bank levy, will raise 343 billion forint ($1.7 billion) annually for three years beginning in 2010.

The government plans to use the funds to meet budget deficit targets, fund tax cuts on corporate and personal incomes and tax breaks for families with children. Prime Minister Viktor Orban said yesterday that the levy is necessary to avoid raising taxes on individuals after five years of budget cuts.

The tax for energy, telecommunication and retail companies will be based on 2010 sales, rather than last year’s revenue as originally planned.

The highest tax bracket is for telecommunication companies with sales of more than 5 billion forint, including Deutsche Telekom AG’s Magyar Telekom Nyrt., which will pay 6.5 percent of sales. The company expects to pay “about half” of the annual 61 billion forint the government expects from the industry, Chief Executive Officer Christopher Mattheisen said on Oct. 15.

Retail, Energy Estimates

Retail companies with sales of more than 100 billion forint will pay 2.5 percent. Tax levels for these two industries differ depending on sales. Of the 30 billion forint the government expects from retailers, Tesco Plc may have to pay 12.1 billion forint, Spar Magyarorszag Kft. 6.1 billion forint and Groupe Auchan SA 3.4 billion forint, the MTI news service said, citing the Hungarian Trade Association.

All energy companies will pay 1.05 percent of sales regardless of their size. Mol Nyrt., Hungary’s largest refiner, expects to pay between 15 billion forint and 20 billion forint, Chairman and Chief Executive Officer Zsolt Hernadi said on Inforadio late yesterday. E.ON AG’s Hungarian unit may pay about 15 billion forint, spokesman Istvan Kutas said, the newspaper Nepszabadsag reported today.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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