The ECJ concluded that a Hungarian local tax differs from VAT such that it cannot be deemed to be a tax which can be characterised as a turnover tax for the purposes of the Sixth VAT Directive. Therefore, the Hungarian local tax is compatible with the Sixth VAT Directive.

In summary, the key issues in the decision, that the Hungarian local tax is not a form of VAT, are:

• Since the Hungarian local tax is calculated on the basis of periodic turnover, it is not possible to determine the precise amount of that charge which may be passed on to the customer when each sale is effected or each service supplied. Therefore, the condition that this amount should be proportional to the price charged by the taxable person is not satisfied.
• Not all taxable persons have the possibility of passing on, or passing on in full, the burden of the tax to the final consumer.