April 5 (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."