Tax breakthrough in Hungary
14 May 2014
Scotch Whisky, and other imported drinks, should benefit from a
fairer playing field for trade in Hungary thanks to intervention by
the European Commission (EC) and the European Court of Justice
(ECJ) on taxation.
This is a breakthrough for the Scotch Whisky Association (SWA)
which launched two formal complaints with the EC on tax and excise
The ECJ has now ruled that the tax exemption in Hungary for
palinka, the country's traditional fruit spirit, is illegal.
Palinka had benefited from a zero tax rate as a result of a
Hungarian government decision in 2010. Following intervention from
the SWA on the basis that European Union regulations only allow a
50% reduction in certain circumstances, the ECJ has strongly
condemned Hungary's actions. The ECJ ruled unequivocally that
Hungary had breached its EU obligations and also said that zero
rate tax on palinka produced commercially and at home is
Separately, the EC has asked the country to amend its
legislation applying two different excise rates for spirit drinks
depending on their composition and production method. The SWA had
filed a complaint regarding duty discrimination. The EC has now
issued a 'reasoned opinion' asking Hungary to apply a single rate
of excise on spirits. EU rules state that one rate of excise duty
must be applied to all spirit drinks based on their alcohol
content. This is to stop competition being distorted within the EU.
If Hungary does not comply within two months, the EC may refer the
matter to the ECJ.
Nick Soper, director of European affairs at the Scotch Whisky
Association, said: "The decision regarding tax treatment and excise
rates in Hungary is welcome news for the Scotch Whisky industry and
for free trade in the European Union. The European Court and the
Commission have condemned the protectionist tax discrimination in
Hungary and the damage it could do to fair competition, a basic
premise of the Single Market."
Scotch Whisky exports to Hungary were worth £3.7million in
The specific breach (palinka) was of article 22.7 of Directive
92/83. There was also a breach (no tax on home distillation) of
articles 19-21 of the same Directive.
For further information please contact Rosemary Gallagher, SWA
communications manager, 0131 222 9230 or 07432 605385 or email firstname.lastname@example.org