Hungary has violated European Union rules by keeping excise tax on tobacco products below the prescribed threshold, the Court of Justice of the European Union (ECJ) said on Thursday.
The European Commission appealed to the ECJ in October 2019 with the complaint that Hungary had failed to gradually increase the consumption tax on tobacco products to the required threshold by December 31, 2017.
According to EU directives, the consumption tax on tobacco products must amount to 60 percent of the average retail price, but at least 90 euros per 1,000 cigarettes. The 60 percent quota does not apply to prices over 115 euros per 1,000 cigarettes.
The EC said Hungary had not reached this threshold in 2017 or in subsequent years until the lawsuit was filed, which distorted competition within the bloc and was in breach of EU health regulations.
The ECJ on Thursday confirmed the EC’s claim that Hungary had failed to comply with EU regulations.
State Secretary of the Ministry of Finance, Andras Tallai, said in response that Brussels had already taken steps in 2018 to force Hungary to increase the excise tax on tobacco because it was below the EU-regulated threshold. If the ECJ had only waited seven days with its current decision on an issue that has dragged on for two and a half years, it would not have found Hungary guilty, he added.
The Hungarian government refused to introduce a “drastic and sudden increase” in early 2018 and decided to increase it gradually, he said. Since then, it has tried to convince the EU that a fairer excise duty system is more appropriate, one that takes into account the differences between Member States’ tax systems and the different income levels of their populations, he added. EU rules continue to neglect the fact that countries on the EU’s eastern borders have to fight hard against cigarette smugglers and black market imports, he said.
“With the Brussels bureaucrats refusing to accept Hungary’s arguments, citing differences between Member States, the country had no room for maneuver,” and the excise duty on tobacco products will be raised in two steps, he said. The first 7.3 percent increase was introduced on January 1, and a further 4.8 percent increase will come into effect on April 1, he added. After the second surge, Hungary will have met EU requirements, he said.