Hungary says it will sue Austrian supermarket chain Spar for defamation

BUDAPEST (Reuters) - Hungary's government plans to sue Austrian supermarket chain Spar for defamation, Prime minister Viktor Orban's chief of staff told a press conference on Thursday.

"Proceedings will be opened against Spar, in court, and presumably for defamation," Gergely Gulyas said.

Spar did not immediately respond to a request for comment.

The Austrian government and Spar sent letters to European Union commissioners in March saying that a special tax introduced in 2020 discriminated against foreign retailers in Hungary, and was therefore in breach of EU law.

The European Commission said on April 5 that it was looking into the complaints and will "ensure appropriate follow-up".

Taxes on retailers in Hungary have increased to as much as 4.5% of revenue since the government announced the special tax, Spar Austria CEO Hans Reisch said in the letters dated March 4, 11 and 20.

"Foreign-owned retailers, including SPAR Hungary... face the highest tax bracket of the special tax," Reisch wrote in a letter seen by Reuters, adding that Hungarian competitors operating in franchise chains consistently benefit from a lower tax rate up to 1%.

The tax forces foreign retailers to operate at a loss because profit margins in the retail sector are lower than 4.5%, Reisch said.

(Reporting by Boldizsar Gyori; Editing by Kirsten Donovan)