Hungary tells EU it will not abolish 'illegal' telecoms tax

(BUDAPEST) - Hungary has formally informed the European Commission that it will not scrap a special telecoms tax that Brussels said violated EU regulations, the foreign ministry said Friday.

The Hungarian government "sticks to its position that the special tax... does not break EU rules," the ministry said in an emailed statement to AFP, citing its November 29 response to the commission.

"The next step will be that the Commission either closes the case or continues it in front of the European Court of Justice," it said.

The European Commission said in September that the levy, which brought in 61 billion forints (202 million euros, $273 million) last year, was illegal and gave Budapest two months to abolish it.

Brussels' concern was that the tax went into the government's central budget, not into meeting the specific costs of regulating the telecoms sector, and that the authorities had failed to consult the sector properly beforehand.

Prime Minister Viktor Orban's centre-right government has said the telecoms tax "is a special financial contribution payable to improve the budget balance" during the economic crisis.

Orban introduced "crisis taxes" of 6.5 percent of gross revenue on retail, energy, financial and telecoms firms in October 2010 to plug budget holes.

The taxes, together with other unorthodox policies, shook investor confidence in Hungary and eventually forced the government to turn to the International Monetary Fund and the European Union to restore markets' trust.