EU court adviser says Poland, Hungary turnover taxes are legal

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The top European Union court should back Polish and Hungarian taxes on turnover despite a European Commission objection that they give an unfair advantage to smaller businesses, a senior adviser to the court recommended on Thursday.

The EU executive had decided that a Polish tax on retailers and Hungary’s levy on broadcasters or advertising publishers were state aid because the progressive tax rates on turnover meant smaller companies were taxed “at too low a level”.

Poland and Hungary challenged the Commission’s findings and won at the General Court of the European Union in 2019, the second-highest EU court, prompting the Commission to appeal to the Court of Justice of the European Union (CJEU).

Advocate General Juliane Kokott advised judges to uphold the initial ruling in an opinion published by the court.

EU judges typically follow the opinions of advocate generals although are not bound to do so. They would normally deliver their ruling in two to four months.

Taxation was a matter solely for individual EU countries to decide. Taxing turnover had advantages and disadvantages and was clearly on the rise, as demonstrated by the planned EU digital services tax, Kokott said.

Progressive rates of taxation were also perfectly common as a means of differentiating people or companies according to their ability to pay, she said.

“High turnover does not necessarily lead to high profit, but high turnover is a prerequisite for high profit. The differentiation is therefore not inconsistent,” Kokott’s opinion said.

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