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EC opens Hungary state aid investigation

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The EC has announced an in-depth investigation into Hungary’s advertisement tax, introduced in June 2014, and has also taken a separate decision to apply a suspension injunction with immediate effect which prohibits Hungary from applying the tax rates of the advertisement tax stipulated in the country’s Act XXII of 2014 on Advertisement Tax until the Commission has finished its assessment.

In particular, the EC says it has concerns that the progressive tax rates, ranging from 0 to 50%, could selectively favour certain companies and give them an unfair competitive advantage. The EC also says that the opening of an in-depth investigation gives interested third parties the opportunity to comment and that it ‘does not prejudge the outcome of the investigation’.

Under Hungary’s Advertisement Tax Act, companies are taxed at a rate depending on their advertisement turnover and companies with a higher advertisement turnover are subject to a significantly higher tax rate. At this stage, the Commission considers that this progressivity of the tax rates, ranging from 0% to 50%, selectively favours certain media companies, in breach of EU state aid rules. Due to the progressive rates, companies with a low advertisement turnover are liable to pay substantially less advertisement tax, even in proportion to their advertisement turnover, than companies with a higher advertisement turnover. The EC argues that 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, and that the Hungarian authorities have not presented any objective reason that would justify this.

Commissioner Margrethe Vestager, in charge of competition policy, said: ‘It is very important that we ensure a level playing field on media markets throughout Europe. Many media today rely on advertisement income to finance their operations. I welcome the signals from the Hungarian government that they intend to make changes to the advertisement tax. Our state aid investigation will look in detail both at how the advertisement tax applies currently as well as how it is amended, to make sure there is no unfair discrimination against certain media companies.’ See

Issue: 1255
Categories: News , International taxes