EC finds against Hungarian ad tax

The European Commission has found that the Hungarian ad tax is in breach of EU State aid rules because its progressive rates grant a selective advantage to certain companies.
It also unduly favours companies that did not make a profit in 2013 by allowing them to pay less tax.
Under Hungary’s 2014 Advertisement Tax Act, companies were taxed at a rate depending on their advertisement turnover. Those with a higher advertisement turnover were subject to significantly higher, progressive tax rates, ranging from 0% to 50%.
The EC opened an in-depth investigation in March 2015 and found that the country has not demonstrated the progressive tax rates were justified by the objective pursued by the ad tax. Furthermore, the possibility to deduct losses carried forward also unduly favoured certain companies.
On this basis, it concluded that the measure was incompatible with EU State aid rules.
The EC notes that at the time it opened its in-depth investigation, it also asked Hungary to suspend the application of the tax. Hungary suspended the tax but implemented an amended version, without notifying it to or consulting the Commission.
The EC investigation found that the amended ad tax, in force since July 2015, took steps in the right direction but did not fully address the Commission’s concerns.
Its decision requires Hungary to remove the unjustified discrimination between companies under the 2014 Advertisement Tax Act and/or the amended version and restore equal treatment in the market.
It concludes by saying: “The Commission does not question Hungary’s right to decide on its taxation systems or on the objective of different taxes and levies. However, the tax system must comply with EU law, including State aid rules, and cannot unduly favour certain companies over others”.
As previously reported by Broadband TV News, the ad tax had a particularly strong impact on the national commercial broadcaster RTL, which filed an official complaint with the EC in October 2014.