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Hungary To Defy EU Over Advertising Tax

by Ulrika Lomas,, Brussels

07 November 2016

The Hungarian Government has announced that it is "committed" to retaining the country's advertising tax following the European Commission's recent decision that the levy is in breach of European Union state aid rules.

The Commission said in a ruling announced on November 4 that the progressive nature of the tax on advertising revenue gave companies with a low turnover an unfair economic advantage over competitors. It called on Hungary to remove the discriminatory provisions of the advertising tax law and "restore equal treatment in the market."

However, in a statement issued in response to the EC's ruling, the Hungarian Government pledged to "do everything in order to protect this innovative Hungarian initiative," and argued that the Commission's decision itself is "contrary to EU law."

"The progressive rates of the advertisement tax are not in violation of the state aid rules because businesses in the same position, or in other words, businesses with the same sales revenues are required to pay the same amount of tax. Consequently, the rules in question cannot be selective as a matter of course, and cannot result in state aid. Several relevant rulings of the European Court, too, confirm this," the Government stated.

"The Commission's decision does not only stand in violation of the member states' tax sovereignty and EU law, but is also discriminatory against Hungary, given that the Brussels body does not find objectionable advertising tax regulations in other member states which differentiate on account of the different advertisement publishing methods," it added.

The Commission's ruling raised the possibility that Hungary would have to claw back tax from those companies which enjoyed an unfair advantage. However, the Government suggested that it would refuse to recover what the Commission considers as illegal state aid.

"Hungary will not retroactively impose taxes of any kind on small businesses which enjoy exemption from the payment of the advertisement tax even at Brussels's request," the Government said.

"The Hungarian Government will not allow global digital businesses which obtain significant revenues from advertising activities to avoid the obligation of paying taxes, thereby wronging the Hungarian state budget," the statement concluded.

TAGS: tax | small business | business | European Commission | Hungary | law | budget | regulation | Europe

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