(Reuters) - The European Commission is looking into a complaint about Hungary's tax on retailers, saying it will "ensure appropriate follow-up" after the Austrian government and Austrian retailer Spar objected to the policy in letters seen by Reuters.

Taxes on retailers in Hungary have been increasing since the government announced a special tax in 2020, and the tax rate is now up to 4.5% of revenues, Spar Austria CEO Hans Reisch said in letters to the Commission on March 4, 11, and 20.

In the letters, addressed to European Union antitrust chief Margrethe Vestager, industry chief Thierry Breton, and economy commissioner Paolo Gentiloni, Reisch said the tax discriminated against foreign retailers in Hungary, and was therefore in breach of EU law.

"Foreign-owned retailers, including SPAR Hungary... face the highest tax bracket of the special tax," Reisch wrote. "In contrast, Hungarian competitors operating in franchise chains consistently benefit from lower tax rates (0-1%)."

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

The Hungarian government did not immediately reply to a request for comment.

Austria's economy and foreign ministers wrote to European Commission President Ursula von der Leyen on Jan. 31, saying Hungary's taxation policies were disproportionately impacting foreign retailers' ability to operate profitably in the country.

"The Republic of Hungary is pursuing an approach that is contrary to the internal market objective, with serious negative consequences for food retailers from other EU member states," the ministers wrote in the letter seen by Reuters.

The Commission, asked about Austria's complaint, said: "The Commission services have received a complaint concerning the Hungarian retail tax and will analyse it and ensure appropriate follow-up."