European Commission Vice President Attacks Hungary's New TV Tax

European Commission Vice President Neelie Kroes

EC vice president Neelie Kroes says with its new 40 percent tax on TV ad revenue, Hungary's conservative government is trying to drive commercial broadcaster RTL out of the country.

Neelie Kroes, vice president of the European Commission, has sharply criticized Hungary's new television advertising tax, calling the implementation a politically motivated act designed to silence critics of Hungary's ruling conservative government.

In an outspoken blog post on Monday, which was also published in Hungarian newspaper Nepszabadsag, Kroes condemned the new law, which imposes a punitive tax rate on television advertising revenues above a certain level.

Kroes said the measure "disproportionately affects one single media company, RTL," which is the only company that would, according to its own calculations, face the highest rate of tax — 40 percent of advertising revenues — resulting in significant losses and "putting in jeopardy their ability to operate."

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RTL is the largest commercial broadcaster in Hungary, with its local division RTL Klub controlling around a quarter of the Hungarian market. RTL Klub has been an outspoken critic of Hungarian Prime Minister Viktor Orban and his right-wing Fidesz party since they took power in 2010.

Kroes said that the new tax is clearly a politically motivated attack on RTL, which is controlled by German media giant Bertelsmann.

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"It is hard to see that the goal (of the new tax) is anything other than to drive (RTL) out of Hungary," she writes. "The Hungarian government does not want a neutral, foreign-owned broadcaster in Hungary; it is using an unfair tax to wipe out democratic safeguards and see off a perceived challenge to its power."

Kroes said that the advertising law, which takes effect in August, comes after Hungary's 2010 media law, which gave Orban's government huge powers over Hungarian media and, she argues, "breach(ed) the Hungarian constitution and EU law, jeopardizing fundamental rights."

RTL has said that it expects to pay $20 million (€15 million) in extra tax under the new regime, a bill that would essentially wipe out its operating profit in Hungary. The pan-European broadcaster said the Hungarian government has unfairly singled RTL out with the new legislation. An amendment to the original law means the 40 percent tax rate will only kick in on TV ad revenues over $88 million (HUF 20 billion). RTL's Hungarian division RTL Klub is the only media company in Hungary with earnings big enough to qualify.

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"This is about more than just one tax or just one company. It is part of a pattern that is deeply worrying, a pattern contrary to the EU's values," Kroes wrote. "The picture it paints is of a media sector that is (at best) uncertain and self-censoring and at worst partisan if not government-controlled. …The fact is, government control, monopoly and censorship belong to a different, darker period in Hungary's history, and no one should seek a return to it," referencing Hungary's past as a communist dictatorship from 1947 to 1989.

Kroes said Hungary was not the only European country where there were concerns about political influence on media freedom and debate about media concentration, citing Bulgaria, Italy and the U.K. as examples "where such concerns and debates exist … with different emphases and in different contexts."

Twitter: @sroxborough