A bill on taxing advertising revenues was fast-tracked through the Hungarian parliament on June 11, 2014, with 144 Fidesz–KDNP and Jobbik Members of Parliament voting in favor and 30 opposition party Members of Parliament voting against it. The advertising tax differentiates among revenue categories: it is 0 percent for revenues up to HUF 0.5 billion but it soars to 40 percent for revenues exceeding HUF 20 billion.

Only commercial television channel RTL Klub is in the latter bracket and that’s why RTL Klub has repeatedly slashed the bill and called it curtailment of the freedom of the press. Over 130 media organizations protested at the new tax last week.

Observers put the expected tax revenue to HUF 9 billion. However the advertising tax might force some media outfits to reduce staff and cut budgets for content production, which in turn may reduce the advertising tax the treasury can expect from them. At the end of the day the unpaid tax might be way bigger than what the treasury gets in the advertising tax.

The advertising tax law obliges the media organizations affected to start tax payment this year as it will become operative on the 31st day upon its promulgation.

The tax base is defined as revenues gained from advertisements appearing in the media services, the print press, advertising surfaces outdoors, on vehicles, other printed matter, on the walls of real estate and on the Internet. The advertising tax is also payable for ads propagating the entity’s own products and services. In that case the tax base is the cost incurred in connection with making that advertisement public.

The law on advertising tax applies to all media service providers operating in Hungary and those broadcasting programs in Hungarian in at least half of their daily broadcasting time. It covers the publishers of press materials, vendors of outdoor advertising surfaces and Internet advertising outlets. Magyar Hírlap Online

The online version of Magyar Nemzet, wrote that the “The Hungarian Advertising Association has appealed to the president of the republic not to sign the bill into law. The HAA considers the bill discriminative.

“We were shocked to learn that earlier today parliament had approved the bill on advertising tax in a fast-track procedure without any appropriate explanation. The bill was adopted without sounding out society or the stakeholders,” said the president of the HAA to Hír Television. “We have called on the president of the republic to send the bill back to parliament for reconsideration. This law is discriminative in an unprecedented manner. We will use every means to oppose it,” Zsolt Urbán said.

Pro-government media organizations also joined the protest. Róbert Puzsér has been an outspoken critic of advertisements. He wrote on mandiner.hu: “In Hungary you can only see a Popular Front-like joint action if the victim of official measures is advertising – advertising that is mainly to be blamed for general decline in cultural awareness and the absence of the freedom of the press.”

Hvg.hu, the online version of the weekly Heti Világgazdaság learned that Tuesday evening, on June 10, government party Members of Parliament submitted a motion to modify the advertising tax bill. Media organizations that were loss-making in 2013 may write off from the tax base 50 percent of their deficit. The amendment motion provoked a heated debate in parliament’s legislative committee between Members of Parliament of the ruling and opposition parties. Opposition Members of Parliament claimed the amendment motion favors the TV2 [commercial television channel] and called the bill “Lex TV2”. László L. Simon (Fidesz), who had submitted the bill, quipped that that TV2, which is considered as leaning towards the right, is profit-making.

In Heti Válasz Zoltán Laky made an interview with László L. Simon.

Q: Is the bill’s sole aim to increase treasury revenues or are there also other considerations?

A: When the present media law was framed in 2010, there were optimistic expectations that it would bring about favorable changes in the commercial media, that their news shows wouldn’t just carry reports about crime, accidents and disasters. Such a change didn’t take place. Over the past four years Members of Parliament of Jobbik repeatedly prodded us during sessions of the culture and media committee of parliament that the media law could be violated unpunished by, for instance, broadcasting the advertisements more loudly than other programs. We have been under pressure so that the media authority should address the issue of advertisements. Not that the advertising tax is a direct consequence of such pressure but let me tell you that the commercial media have been on the agenda throughout the past four years.

Q: The advertising tax is not an adequate instrument to solve those problems. The Hungarian media might have the impression that the government intends to narrow their room of maneuver.

A: It’s kind of funny that an editorial article even in [the pro-government] Magyar Nemzet claims that the government wishes to restrict the freedom of the press. When I consider the question of the freedom of the press and the opportunities of opposition views to get published, the case of [the weekly] Magyar Narancs is an important question. Magyar Narancs is not affected by the law on advertising tax because its advertising revenues are below the HUF 500 million limit. By contrast, the banter of Győzike Gáspár – who has tax arrears in excess of HUF 10 million – and his wife, Bea, on Való Világ [a popular Hungarian reality show] is not an issue that belongs to the freedom of the press debate. When the advertising revenues of some commercial channels go down, they will perhaps broadcast Mexican soap operas instead of programs produced by themselves.

Q: RTL Klub is already considering to discontinue Barátok közt [Among Friends, a popular Hungarian soap opera].

A: I’m ready to discuss whether or not the tax rates are too high but it is totally unjustified to rave about the “end of the freedom of the press”. If all major commercial broadcast media stop operation in Hungary tomorrow, the Hungarian television viewers would learn about fewer train accidents in, say, South Africa and fewer plane crashes. Said media are not real factors when it comes to shaping the political public opinion in Hungary.

The print edition of Heti Világgazdaság (hvg) devoted ample attention to the issue.

“In plain English the advertising tax is a media tax. But if it were called media tax, it wouldn’t be so easy to capitalize on laymen’s aversion to advertisements. János Lázár [minister heading the Prime Minister’s Office] attempted to articulate the opinion of an “average” man-in-the-street when he said that ‘you just cannot watch a film undisturbed as it is repeatedly interrupted by commercials’.

Actually the new special tax will not hit the advertisers in the first place but the television and radio stations, daily and weekly papers and online portals that publish them. The advertising revenue is the main or only source of income for the majority of those media organizations. In other words, it is thanks to the advertising revenues that make it possible for the viewers, listeners and readers to access a broad array of media services (free or at a low price) as opposed to the news stream that is generated by media outlets that are financed by the state, political or business interest groups. How many minutes of commercials may be included in the programs is regulated by the so-called media constitution, a law approved by Fidesz’s two-thirds majority in parliament.

“The evident message of this law is this: there is no life outside Fidesz’s sphere of influence and, even if there is, its shrinking boundaries are drawn by the so-called ‘national cooperation system’. It seems the government drew the conclusion from the first [two] terms of the Orbán cabinet that the ‘full court press’ is not enough: the opponents’ backbone needs to be broken.

The government will defend the special tax claiming that the papers specializing on politics don’t make enough revenues to be subject to that law and that the advertising tax will only affect them if they become incorporated into media conglomerates. The government can happily refer to the small-circulation opposition papers and websites: they can be demonstrated as evidence of the freedom of the press. But in actual fact those media only reach a limited audience.”

In the online version of Népszabadság Imre Bednárik labels the advertising tax as censorship.

“The advertising tax is a grave violation of the freedom of the press. It applies economic means to restrict public forums in Hungary. This special tax further deteriorates the situation of the ailing media industry. The advertising tax hits those profit-oriented media the hardest that have not sold out their critical attitude to the government of the time in exchange for state-sponsored advertisements. Those media outfits that have given up their critical attitude, or have never doubted the merits of Fidesz and Viktor Orbán, are unaffected by the new law. Most of their income is from state-sponsored advertisements. The advertising tax will take away a part of that income but those media units can be certain to get back state support from other sources.

“The new tax will upset the business plan of the profit-oriented media entities; their profit will be reduced or swept away altogether. The key political goal of the advertising tax is to subjugate the profit-oriented and still critical media units to Fidesz. The disobedient media units can try to make up for lost revenues by broadcasting/carrying state-sponsored advertisements but if they resist, let their profits dwindle or they should stop operation altogether.

“The profits of RTL Klub are to be reduced while TV2, which has shifted to owners who are close to the government and which has lost its critical edge towards the government, will have to be pay less tax. That is likely to strengthen TV2’s position. Some observers have the hypothesis that right-leaning oligarchs would like to buy RTL Klub because it seems to be a profitable investment, and the advertising tax is merely a message to the German owners of RTL Klub to lower the selling price.

“A governing party politician has called the advertising tax a ‘health tax’ levied on commercial television channels because they cause damage to society. However that is an untenable allegation. If commercial television stations really harmed society, the adequate response should not be an advertising tax but the amendment of the media law to protect certain social groups, say, the minors.

“On January 2011 Népszabadság carried a front-page statement in each of the official languages of the European Union stating that the media legislation adopted in late 2010 had put an end to the freedom of the press in Hungary. Later on the Constitutional Court squashed the provision of the media law that we criticized, which also justified our claim.

“The advertising tax, in a similar manner to the media law of 2010, is an instrument for the authoritarian endeavors of the Fidesz-led government. It sets the scene for disciplining, punishing and eventually silencing those who embrace values others than theirs. The advertising tax is Fidesz’s latest onslaught on the freedom of the press in Hungary.”

Elsewhere in Népszabadság there is reference to what Prime Minister Viktor Orbán said on this issue during an interview with the government-controlled, nationwide radio channel. He said that as long as they are in power the special taxes will be in force because “whoever has an extra high income should be ready to carry more of the common burden”. The advertising industry, he argued, must also take a fair share of the collective burden.

When asked what economic necessity forced the government to introduce the advertising tax, he said the motivation was not some kind of necessity but the search for fairness. Orbán stated that the government had discussed the issue with all the stakeholders and is in possession of all the necessary calculations. “We will collect about HUF 10 billion from a sector that is highly profitable,” he said.

When asked about the across-the-board protest by media organizations, he said: “That’s exactly how the bankers responded. Bankers on the right and left of the political spectrum joined hands to protest.” “Who likes to pay taxes? And the more one earns, the less he likes to pay taxes. When the bank tax was introduced, bankers warned us that loans will dry up and the [foreign] banks will leave Hungary. But today in Hungary the banking sector is operating alright,” Viktor Orbán said.

Source: Budapest Telegraph