The European Court of Justice can decide whether the shops passed the price cap

By: Trademagazin Date: 2024. 03. 14. 11:42

Spar filed a complaint with the European Union regarding the Hungarian government’s retail measures. According to the Netherlands-based company, the special retail tax and the price cap contradict the EU legal environment. The European Court of Justice has previously ruled on similar cases and found that the public burden taxing retailers with high turnover with band rates does not conflict with EU law. In light of this, Spar’s chances with regard to the special tax are not very encouraging, the Financial Times wrote on Tuesday.

The government introduced the extra profit tax on the sales of retail companies in 2022, and then increased the tax rates from 2023. According to Spar, this practice is discriminatory and has caused them significant cost increases. The price cap, which obliged the shops to sell the affected products below the purchase price, had a similarly negative effect on business activity. Although the price cap has already been abolished, it has been replaced by mandatory promotions for large foreign chains, which similarly negatively affected the companies. Spar estimates that the government measures have cost them nearly €90 million and that they will suffer a loss of nearly €50 million in 2023.

The European Court of Justice sees that the price cap and the extra profit tax had a market-distorting effect and indirectly increased inflation. The measures passed the costs on to the customers, so they did not reduce, but increased the burden on the customers. The underdevelopment and insufficiently efficient operation of Hungarian food industry companies was the main reason for the European champion Hungarian food inflation, not the prices raised by foreign-owned supermarkets. According to the analysis carried out by the MNB, the aggregate margin calculated for all products at the sectoral level did not change in 2022 compared to 2021, so the prescribed stops and promotions were brought in at the price of other products.

In the future, the European Court of Justice may decide whether the price cap and the extra profit tax caused losses to the retail chains.

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