Media Group Bertelsmann Says Hungarian Government Out to Destroy Its Business

1:06 PM PST 06/30/2014 by Scott Roxborough
Robert Voets/CBS
Bertelsmann's RTL Klub in Hungary carries such US series as "CSI".

An amendment to a new advertising tax law leaves Bertelsmann, a major player in the Hungarian TV industry, as the only company that has to pay the 40 percent tax rate on its revenues.

Media giant Bertelsmann is crying foul after the Hungarian government proposed a new advertising tax that would force the company to pay a rate of up to to 40 percent of its revenues.

An amendment to the law leaves Bertelsmann, whose RTL television division is the largest commercial broadcaster in Hungary, as the only media company that would pay the top rate. The 40 percent rate kicks in on revenues above $88 million (HUF 20 Billion). RTL's Hungarian division, RTL Klub, which controls around a quarter of the local TV market, is the only media company in Hungary with earnings big enough to qualify.

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Bertelsmann accuses the government of Hungarian Prime Minister Viktor Orban of deliberately trying to destroy its business. Since taking power in 2010, the right-wing populist has repeatedly clashed with independent media as well as with his European Union partners over his alleged crackdown on media freedoms in the country. Orban has also introduced a number of windfall taxes targeting specific sectors of the economy.

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"This law has nothing to do with proportional burden sharing or commercial television programming," RTL said in a statement. "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.

A previous version of the new tax law passed earlier this month. That version had a clause allowing media companies to partially offset their tax obligations with losses earmarked in the previous financial year. It would have greatly reduced RTL Klub's 2014 tax bill. The proposed amendment would allow only unprofitable companies to offset tax in this way, leaving profitably RTL with a hefty bill.

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Last week, the Hungarian government also began a tax probe into the company.

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

Earlier this month, RTL Klub's broadcast went black for 15 minutes to protest the tax and Orban's policies.

Email: scott.roxborough@thr.com
Twitter: @sroxborough

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