Commission takes action against Hungary's packaging tax

The Commission decision could help lower the price of packaging for processors selling products in the country, or would allow them more freedom in the choice of supplier. The European Organisation for Packaging and the Environment (Europen) has long lobbied Brussels to crack down on what it calls such environmental "stealth taxes" against packaging. These taxes are often disguised as attempts to protect the environment, but in reality serve to keep out the foreign competition, Europen claims. Europen welcomed the announcement by the Commission that it has moved to the second stage of infringement proceedings against beverage packaging taxes in Hungary. The proceedure involves the Commission issuing an opinion formally requesting Hungary to amend its legislation relating to such taxes. If Hungary does not comply within a sufficient time, the Commission could step up action by fining the country. Europen's managing director, Julian Carroll, said the decision was "ground breaking". He said: "This is the first time the Commission has taken a legally binding decision against an eco tax on packaging on the basis that it infringes Article 90 of the treaty by discriminating between locally produced products and those imported." ​​The issue relates to Hungary's system of taxes on beverage containers, which is based on targets for reusable containers. "Reusable systems tend to favour local operators and place imported products at a disadvantage,"​ Europen stated. "The basis for setting the quotas was 2003 market statistics which have had the effect of freezing the market position and thus protecting domestic producers against increasing imports."​ Carroll noted that Europen has pointed out that this type of taxation is a policy that could potentially disrupt the internal market. "Taxes portrayed as protecting the environment are all too often, in reality, trade protection measures,"​ Carroll stated. He noted that four EU members - the Czech Republic, Luxembourg, Germany and UK - have submitted formal objections to the Commission regarding the Hungarian measure. "The fact that Germany was one of the member states complaining is somewhat ironic,"​ said Carroll. "It is producers of German beer who are among those suffering at the hands of the Hungarian tax whereas in recent years Germany itself has been the subject of infringement proceedings by the Commission concerning its own beverage packaging legislation."​ Carroll said that Europen's members hope the Commission action will spur Hungary's government to discuss changes with industry thus avoiding the infringement case proceeding to the courts. Europen called on the Commission to incorporate the use of market based instruments in environment policy as part of the bloc's ground rules. "Although the Commission announcement of its infringement proceedings against Hungary suggests that the Commission does not oppose environmental schemes which promote systems for the reuse of beverage containers, Europen continues to believe that a set of tests needs to be established which economic instruments must meet before they can be introduced,"​ the association stated.