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06/12/2016

Bertelsmann says Orbán is out to destroy it

Elections

Bertelsmann says Orbán is out to destroy it

Viktor Orbán. Budapest, 2011.

[Europa Pont]

German media giant Bertelsmann’s Hungarian business said yesterday (30 June) the government was out to destroy it, after an amendment submitted to parliament left it as the only company in the top bracket of a new advertising tax.

Since he took power in 2010, Hungarian Prime Minister Viktor Orbán has clashed with his European Union partners and foreign investors over policies from media reforms to windfall taxes on specific sectors of the economy.

The advertising tax has prompted protests from Hungarian media companies and advertisers, which say it unfairly penalises them and threatens many with insolvency while doing little to improve Hungary’s state finances.

Media companies must pay a progressive tax of up to 40% on revenues above 20 billion forints (€64.7 million) per year.

In Hungary, the only company with that scale of revenues is the RTL group, the Bertelsmann subsidiary that is the country’s biggest TV broadcaster.

“This law has nothing to do with proportional burden sharing or commercial television programming,” RTL said. “The goal of the law is clearer than ever: to leave no media in the country outside the influence of the powers that be.”

The government said the law was not aimed at any single company and would help ensure that everyone paid their share of tax.

The law passed earlier this month allowed media companies to partially offset their advertising tax obligations with losses earmarked in the previous financial year. That would have allowed RTL to pay a much smaller tax bill this year.

In the amended bill, Laszlo L. Simon, a state secretary at the Prime Minister’s office, proposed that only unprofitable companies be allowed to apply the exemption. Because RTL made a profit in 2013, it would have to pay the tax after all.

The government also started a tax probe against RTL last week.

“To us, it was quite obvious that the legislature simply wanted to eliminate RTL and with it the freedom of press in Hungary,” the company said.

The government rejects accusations that it wants to curtail press freedoms. In an statement emailed to Reuters, the Economy Ministry said the tax was not aimed at RTL specifically.

“Introducing the advertising tax was obviously not determined by the results of a single company but a much more complex set of parameters,” the ministry said. “The rules of the advertising tax apply to all market participants.”

“The advertising tax and the amendment submitted today are necessary so nobody can avoid paying taxes in Hungary,” it said. 

Background

Hungarians voted overwhelmingly in April 2010 for a radical change in leadership, sending the ruling Socialists into opposition and giving Fidesz (EPP-affiliated) a qualified majority in parliament.

The election marked the biggest victory for any political party in a general election since the fall of communism 21 years earlier. However, several measures put in place by the new government have since fuelled controversy.

A controversial new constitution that entered into force on 1 January brought tens of thousands of protestors. They believe it undermines the independence of the central bank, the judiciary and the news media. Critics also say that the new measures represent an assault on religious freedom by cutting down the number of recognised religious groups from 300 to 14.

Orbán said his government had stabilised Hungary's finances at the cost of fighting back an "attack by Brussels bureaucrats" when Budapest imposed heavy windfall taxes on banks and mostly foreign-owned energy, telecoms and retail companies.

After a series of voter-pleasing measures, including big utility price cuts for households, higher salaries for teachers and generous child care benefits, Fidesz won the 6 April elections.

>> Read: Orbán wins elections, far right gains ground