The extra tax burden, which was passed by the country’s parliament on October 18, has stung major telecoms players in Hungary – particularly foreign-owned companies – as part of measures to reduce the national budget deficit. The Hungarian government initially promised to extend the new tax to the end of 2012, but has since confirmed that the regime will remain in place until 2014 as it aims to raise a total of HUF61 billion (US$302 million) from the telecoms market alone.
One of Hungary’s largest telecoms companies, incumbent Magyar Telekom, has estimated it will have to pay as much as an extra HUF27.5 billion (US$139 million) for the current tax year. “The special tax imposed on the telecoms sector, among other industries, will have a considerable impact on our results,” said Christopher Mattheisen, CEO of Magyar Telekom.
The company, which is majority owned by Deutsche Telekom, also warned that the extraordinary tax may negatively impact the competitiveness of the country’s telecoms industry and potentially restrict the investment and development of fixed and mobile broadband networks.
The industry is expected to look to the European Commission for support against the move, which has reportedly already forwarded an administrative letter to the Hungarian government asking for further information about the tax.
“Any actions by a government that involve the telecoms market need to be discussed openly with the industry first,” said Saverio Romeo, senior industry analyst for Frost & Sullivan.
