What happens when Hungarian and EU law clash on the issue of corporate profits? We are about to find out.
Earlier this summer, the Hungarian parliament voted to pass an extra profit tax on select industries. To accommodate the Hungarian extra-profit tax, Ryanair raised its rate for consumers by nearly €10.00. The price hike has led to a dispute between the government and the airline. Reports the Budapest Business Journal:
The government office of Budapest launched a consumer protection procedure against Ryanair-DAC on the issue of the passing on the extra profit tax to consumers, Minister of Justice Judit Varga said in a post on her Facebook page.
The airline is accused of “deceiving” its customers “through unfair commercial practices.”
Yahoo News explains that the fine, which is equal to HUF300 million (€777,058.00), is the first of its kind since the new extra-profit tax was passed into law. Ryanair responded by pointing to EU law, which according to Yahoo News, permits airfare pricing within the union “without interference from national governments” and their agencies.
Ryanair is considering suing Hungary in the EU courts over the fine.
On July 20th, the Budapest Business Journal reported that the profit tax was introduced as a measure to counter the negative consequences for Hungary’s government finances from the 2020-2021 pandemic. The fine attached to the tax was motivated in part by concerns that the tax may contribute to higher inflation.
The Hungarian inflation rate is expected to peak later in the year around 11%.