Minister in Charge of the Prime Minister’s Office János Lázár is recommending a reduction of the advertising tax and a switch to a single rate instead of the current tiered system. The Minister did not provide information as to what the new flat rate may be, but in his statement to Hungarian news agency MTI, he cited the Austrian advertising tax on several occasions as being the highest in Europe.

As the Minster explained, the Government has been receiving continuous formal and informal signals since last August about the fact that the European Commission’s Directorate General for Competition has serious concerns with regard to the Hungarian advertising tax.

In a letter sent at the end of January, the Directorate General objected to the advertising tax’s progressive, tiered system, claiming that it provides a selective economic advantage to enterprises with low advertising revenue, and to the level of tax, which it said was “suitable for causing an economic disadvantage”, the head of the PM’s Office said, listing the EU’s concerns.

In addition, the Cabinet has received advice at European Union level that if the owner of the RTL Klub television channel, Luxembourg-based Bertelsmann Group, were to ask for a meeting to discuss the matter then the administration should accept their request, otherwise Hungary will be “open to possible measures”, he added.

The Bertelsmann Group has indeed made a recommendation that is worthy of consideration and which takes into account the fact that the highest rate of advertising tax in Europe, 5 percent, is in Austria, Mr. Lázár said, confirming the fact that the Government has been in negotiation with the Bertelsmann Group in both Luxembourg and Budapest since November in the interests of finding a solution to the situation out of court and without the need for a European Commission procedure.

The Government needs to consider whether to choose “an uncertain legal dispute or a good settlement”, the Minister said.

Accordingly, the head of the Prime Minister’s Office will brief Wednesday’s external meeting of the Fidesz-KNP parliamentary group on the issue and will recommend that the administration considers reducing the tax and introducing a single rate system.

The changes will not necessarily lead to a reduction in revenues according to the government’s calculations, the Minister said, because although “the tax rate will be lower, more people will be paying it”. Tax revenues are estimated at between 6 and 10 billion forints (EUR 20-30M), Mr. Lázár said.

One piece of good news amid the criticism is that the European Commission has not voiced concerns regarding the introduction of the advertising tax itself, the Minister continued, underlining the fact that “practically all of our economic battles with the European Commission concern our surtaxes”.

Mr. Lázár also highlighted the fact that a possible settlement with the Bertelsmann Group could give a further boost to investor confidence in Hungary.

It would be best to bring the debate on the advertising tax to a close within the next three months, he added. However, the Minister also said that the reimbursement of taxes already paid was out of the question.

(Prime Minister's Office)