The European Commission has opened an in-depth investigation to determine whether Hungary’s tax on advertisements complied with European Union rules on state aid. The EC expressed concerns that the progressive tax “could selectively favour certain companies and give them an unfair competitive advantage”. Hungary introduced the multi-bracket tax, with rates ranging from zero to 50%, in June 2014.
“A progressive tax based on turnover places larger players at a disadvantage, unlike a progressive tax based on profits, which can be justified by the higher burden bearing capacity of very profitable companies,” the EC said. “At this stage, the Hungarian authorities have not presented any objective reason that would justify this,” it added. In a separate decision, the EC said it prohibited Hungary from applying the progressive rates, in a “suspension injunction”, until its assessment is finished.
The opening of an in-depth investigation gives interested third parties the opportunity to comment and does not prejudge the outcome of the investigation, the EC noted. Commissioner Margrethe Vestager, in charge of competition policy, said she welcomed signals from the Hungarian government that they intend to make changes to the ad tax, but added that the state aid investigation would examine the changes in detail “to make sure there is no unfair discrimination against certain media companies”.
Ruling Fidesz said earlier that plans were to exempt low-income companies from the tax on advertisements. The party’s group leader Antal Rogán said the government expected a conflict in Brussels because the European Union would expect the tax to apply to even the smallest companies with low revenues. He said that 7 billion forints (EUR 2.3m) projected annual revenue from the ad tax must be maintained.
via hungarymatters.hu photo: euroactiv.com