Parliament levies special tax on advertising revenues of Hungarian media outlets

June 12, 2014

Hungarian media outlets are to pay between 1% and 40% of their advertising revenue to the government after parliament voted yesterday to approve a controversial bill which levies a new sectoral tax on Hungarian or Hungary-based content providers.

WHY?

According to the bill’s alleged author (the governing Fidesz party routinely abuses the right of individual MPs to introduce legislation so as to avoid ordering  impact studies or soliciting expert opinion -ed.), Laszlo L. Simon, the law creating special taxes on advertising revenues was created with one goal in mind: to ensure a proportional sharing of the public burden.

“Previously the taxation system [of Hungary] relied on taxing the personal income to help the public finances, but personal income taxes have now been reduced,” Simon said. “The emphasis of the tax system now is to focus more on usage and consumption (goods and services). Numerous such taxes have been created which have targeted certain segments of the economy – from the standpoint of growth and job creation they have not been significant. The purpose of the law is to help transform the tax system in such a way where entities providing advertising platforms will see new, goods and services-types of taxes.”

Critics claim the legislation disproportionately targets Hungary’s largest independent television station, RTL Klub, the only Hungarian media outlet with annual advertising revenues exceeding HUF 20 billion.  According to RTL’s calculations, it alone would end up paying roughly half of all taxes collected under the new act of parliament.

The tax is widely perceived as an attempt to force RTL Hungary’s German owners to sell the independent televisions station for substantially less than current market value.  Presumably the governing Fidesz-KDNP party has a buyer in mind.  Earlier this year TV2 was purchased by a close business acquaintaince of Fidesz construction and media tycoon, Lajos Simicska.

WHO DOES IT TARGET?

Here’s who has to pay the advertising tax:

– Media content providers,

– Any primarily Hungarian language media product that is published in Hungary, or provided in Hungary,

– Commercial billboards,

– Any advertisement on moving vehicles, in printed media, or on property,

– Any advertisement on the internet (primarily provided in the Hungarian language).

The tax (based on annual advertising revenues)

– 0 percent for advertising revenues under HUF 500 million,

– 1 percent for advertising revenues in excess of HUF 500 million but less than HUF 5 billion,

– 10 percent for advertising revenues in excess of HUF 5 billion but less than HUF 10 billion,

– 20 percent for advertising revenues in excess of HUF 10 billion but less than 15 billion,

– 30 percent for advertising revenues in excess of HUF 15 billion but less than HUF 20 billion,

– 40 percent for advertising revenues in excess of HUF 20 billion.

WHOSE IDEA WAS IT?

Laszlo L. Simon (Fidesz) proposed the law on 2 June 2014. If the name sounds unfamiliar it is because Simon is not known for his political accomplishments. He was elected to parliament in the 2010 national elections to represent Fejer county’s then-4th electoral district. From 2010 to 2014 he served as chairman of parliament’s Committee on Culture and Press Committee. Really.

In Hungary’s 2014 national elections, Simon got into parliament on Fidesz’s national list, that is, without representing an actual constituency.  Simon currently serves as vice-chairman of the parliamentary Committee on Economics chaired by Antal Rogan.

HOW DID THE HUNGARIAN PARLIAMENT VOTE?

Simon proposed the legislation on 2 June. The following day, the bill was assigned to the parliamentary Budget Committee for formal discussion and debate, where it was taken up on 10 June. The newly created legislature committee, chaired by Gergely Gulyas (Fidesz), was forwarded the document on 10 June.

On 10 June the plenary session of parliament voted in favour of expediting the vote on the proposed legislation, and it was set for the following day during a plenary session.

On 11 June, just before the vote, the bill underwent a final modification at the request of its author, Laszlo L. Simon. The modification was accepted, and the bill was presented for a final vote.

The outcome was 144 votes in favor (112 Fidesz, 16 KDNP, 16 Jobbik) and 30 against (20 MSZP, 5 LMP, 5 independent)

Referenced in this article:

2014. évi törvény а reklámadóról, Parlament.hu; 2 June 2014.

2014.06.11.12:09:25-i szavazás, Parlament.hu; 11 June 2014.