Hungary ready to cut advertising tax on EU concerns, rate still debated

Although the specific bill on the modification of the advertising tax has not been readied yet, János Lázár, the minister leading the Prime Minister’s Office, told a meeting of Parliament’s economic committee today that the proposal could be made in March. He also reminded that two European Commission directorates (tax and competition) are currently investigating the advertising tax, hence the need to change it.

At the same time, Lázár underlined that the EU executive has accepted the existence of the tax and its objections were primarily methodological and technical in nature.

The minister stressed that similar advertising taxes are in place in Sweden, Austria, Denmark, Greece and Belgium. He also noted that of the subjects of the levy, Germany’s Bertelsman and the RTL Group have turned to the European Commission with complaints, saying the tax has a major impact on their financial results.

Lázár stressed that in co-operation with the economic committee the government is taking into consideration the aspects presented by the European Commission when proposing modifications to the advertising tax. He did not mention any specific rate, but said the highest rate [excluding Hungary] is in Austria, where it is 5%, whereas the “excellent Hungarian attempt" was a 50% rate, which “put the European Commission’s tolerance to the test."

“It is the first time they have threatened us with suspending legislation in Hungary over a tax, which is one of the most severe sanctions," Lázár said. He added that the law will be repealed with retroactive effect and the tax collected will need to be reimbursed.

Will there be a flat rate?

The minister noted that it remains a question how much budget revenues can be collected if the progressive system is abolished and the highest rate is set to 5% for every subject of the tax According to some estimates, an amendment in line with the EC’s recommendations will yield even larger budget revenues [than the current levy], in the area of HUF 8-10 billion, he added.

Lázár added the cabinet is in talks to grant exemption from the tax to companies with the lowest revenues, as the EU executive did not object to this idea. The minister said there is a realistic chance of keeping the lowest rate of the tax, but then again Hungary will need to comply with the requirements of two EC directorates generals

“I’m not certain at all that both directorates general will approve of this," because they also consider competition aspects, he said.

As regards earlier reports that the cabinet had held political negotiations over the advertising tax, Lázár said the government was in dialogue with the EC about changing the tax. He has confirmed that the cabinet had conducted several “economic type negotiations" with Germany’s Bertelsman Group, in view fo the EC’s opinion and recommendations.

Finally he has cited the programming principals of Bertelsman and RTL Group, namely objectivity and impartiality, which he described as “reassuring also for us", adding that this way “it is out of the question that the tone of style of RTL’s evening news changed in any way after the implementation of the advertising tax."

The budget needs the revenues

András Tállai, state secretary at the Economy Ministry, highlighted that the revenue target from the advertising tax is HUF 6.6 billion, which the budget needs therefore the cabinet should find a solution to make sure this goal is met.

Antal Rogán, head of the parliamentary group of the ruling Fidesz party and Chairman of the committee, talked about a 3-5% tax rate, adding that they can debate about the details of the legislation, but the need for the tax cannot be questioned.

Prime Minister Viktor Orbán said in a radio interview in mid-February that there is a need for the advertising tax and the revenues that it generates, and “we cannot lose this revenue." All other factors, e.g. how large is its rate, etc. are technical issues, Orbán added.

A few days earlier Lázár said the advertising tax would remain in effect in Hungary. One of the most important objectives of the cabinet is to maintain the system of special taxes.

"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."

• Tags:
• legislation,
• economy,
• tax,
• advertising,
• commission,
• jános lázár,
• antal rogán