Economy
Hungary's advertising tax is here to stay - Lázár
Lázár said the government has agreed with the European Bank for Reconstruction and Development (EBRD) and Erste Bank on Monday that the bank tax will also stay, only it will be lowered.
“It is the same with the advertising tax," he said.
“Although based on a request and instructions by the European Commission the government is forced to consider how much the tax should be, but it cannot be subject to a debate whether it should or should not exist," he added.
“There will be an advertising tax, the only question is how much the companies will pay."
Background
Lázár said last week the cabinet has been constantly receiving formal and informal indications about "the Directorate-General for Competition of the European Commission having serious qualms about Hungary’s advertising tax."
In a letter sent the end of January the body specifically objected to the progressivity of the levy, arguing that it creates selective economic advantage for businesses with small advertising revenues and it also found fault with its rate, saying that it "has the capacity also objectively to cause economic disadvantages," Lázár added.
Lázár proposeda reduction of the advertising tax and a revision of the progressive system of the levy to a flat-rate one, mentioning Austria as an example (the rate there is 5%). The top rate is currently 50% on advertising revenues (!).The minister said that according to the government’s estimates, this will not necessarily lead to a decrease in budget revenues from the levy because "although the tax will be lower, more [companies] will be subject to it." He estimates advertising tax revenues to come in between HUF 6 billion and HUF 10 billion.
The Hungarian Advertising Association stressed that the planned change to the legislation could put companies out of business and urges consultation on the matter as soon as possible.
The European Commission told Portfolio that it had received a complaint last year about legislation on Hungary’s advertising tax, as a result of which it contacted Hungarian authorities and is scrutinising the compatibility of the relevant legislation with EU rules.
It also noted that a pilot procedure has been launched by the Commission's Taxation and Customs Union Directorate-General under which it sent a letter to the government on 21 August 2014, seeking basic information whether the advertising tax indirectly discriminates foreign-owned media companies or not.
The preliminary probe is still in progress. The Commission is analysing the response by Hungarian authorities and further information are being gathered, the EC added.
“It is the same with the advertising tax," he said.
“Although based on a request and instructions by the European Commission the government is forced to consider how much the tax should be, but it cannot be subject to a debate whether it should or should not exist," he added.
“There will be an advertising tax, the only question is how much the companies will pay."
Background
Lázár said last week the cabinet has been constantly receiving formal and informal indications about "the Directorate-General for Competition of the European Commission having serious qualms about Hungary’s advertising tax."
In a letter sent the end of January the body specifically objected to the progressivity of the levy, arguing that it creates selective economic advantage for businesses with small advertising revenues and it also found fault with its rate, saying that it "has the capacity also objectively to cause economic disadvantages," Lázár added.
Lázár proposeda reduction of the advertising tax and a revision of the progressive system of the levy to a flat-rate one, mentioning Austria as an example (the rate there is 5%). The top rate is currently 50% on advertising revenues (!).The minister said that according to the government’s estimates, this will not necessarily lead to a decrease in budget revenues from the levy because "although the tax will be lower, more [companies] will be subject to it." He estimates advertising tax revenues to come in between HUF 6 billion and HUF 10 billion.
The Hungarian Advertising Association stressed that the planned change to the legislation could put companies out of business and urges consultation on the matter as soon as possible.
The European Commission told Portfolio that it had received a complaint last year about legislation on Hungary’s advertising tax, as a result of which it contacted Hungarian authorities and is scrutinising the compatibility of the relevant legislation with EU rules.
It also noted that a pilot procedure has been launched by the Commission's Taxation and Customs Union Directorate-General under which it sent a letter to the government on 21 August 2014, seeking basic information whether the advertising tax indirectly discriminates foreign-owned media companies or not.
The preliminary probe is still in progress. The Commission is analysing the response by Hungarian authorities and further information are being gathered, the EC added.
