Hungary will end tax breaks for foreign investors to meet EU criteria

Hungary is expected to stop tax breaks to foreign companies that invest in production to comply with EU competition rules and clear one of the last hurdles in its accession negotiations.

Hungary’s Economy Minister Istvan Csillag said in an interview that the country’s Socialist government would introduce a new incentive package to bring the country in line with EU competition rules by 1 January 2003.

The new package will permit some tax exemptions allowed under EU law, such as for investment in less developed regions or for staff training. The government also plans to buy and lease land to companies at below market rates.

The EU has urged Hungary to immediately end the tax breaks, but Hungary had insisted on granting new exemptions until joining the Union. This helped Hungary attract over 24 billion euro of foreign investment since the early 1990s, but it also delayed accession talks on competition.

Hungary hopes to complete talks on competition by the end of September. However, previously granted tax breaks that run until 2011 are still controversial. Hungary wants to keep them, but the EU insists they should be withdrawn.

Poland has a similar problem in accession talks on competition because of its special economic zones where tax breaks are granted until 2017.


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