The tax also unduly favours companies that did not make a profit in 2013 by allowing them a tax preference, it added. Hungary introduced the progressive tax, with rates ranging from 0% to 50%, in June 2014.

The EC launched an indepth investigation into the matter in March 2015 and asked Hungary to suspend the application of the tax. The EC noted on Friday that Hungary suspended the tax but still implemented an amended version, without notifying or consulting with the EC.

The EC acknowledged that the amended ad tax, in force from July 2015, was a move “in the right direction” but said it maintained progressive rates, albeit over a smaller range of 0-5.3%, and “did not fully address the Commission’s concerns”.

The limitations on past losses also remained unchanged, it added. The decision requires Hungary to remove the unjustified discrimination from the tax rules and restore equal treatment in the market, the EC said. The precise amounts of tax to be recovered from each company, if any, must be determined by the Hungarian authorities based on a methodology established in the EC’s decision, it added.

The economy ministry said after the decision was announced that the government is committed to maintaining the ad tax rules and will defend this “innovative Hungarian initiative”.

The ministry argued that the progressive tax does not grant a selective advantage as companies that have the same turnover pay the same rate.

A number of relevant judgments by the European Court support this position, it added. The ministry said the EC’s decision not only goes against the tax sovereignty of member states but discriminates against Hungary itself as the EU’s executive body has not voiced any concerns about tax rules in other member states that differentiate between different methods of advertising.

Hungary will not comply with Brussels’ request to recover tax revenue from businesses that are exempt from the ad tax, the ministry said.

Republished with permission of Hungary Matters, MTI’s daily newsletter.