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The ruling camp has just revealed its latest idea: it wants media outlets to pay a “solidarity” tax on their ad revenues. Of course, government spin doctors present the new tax as a way of raising funds to balance out the budgetary burdens brought upon us by the pandemic.

But let’s not be fooled by a rhetoric of social solidarity. It’s about delivering on a promise that the Law and Justice party has made a long time ago: the promise of a Budapest-style scenario in Warsaw. In Budapest, independent media are practically non-existent. Hungarian decision-makers have either taken them over or shut them down. The introduction of an advertising revenue tax in 2014 was an important step in that direction.

It was a progressive tax with the highest 50% rate imposed only on a television station the Hungarian authorities hated the most- RTL Klub. Self-promotion material, i.e. ads promoting the outlet’s own publications, were also taxed. The new tax has hit independent outlets especially hard, because authorities had a variety of ways to help government-friendly media stay afloat, including the purchase of additional ad space.

Of course, the introduction of the new tax didn’t go unnoticed, and many independent media outlets raised their voice to protest the new legislation. The European Commission came to their defense, referring the matter to the European Court of Justice, indicating that the murderous tax progressivity violates the principle of non-discrimination of companies.  

In this case, however, the EU’s legal procedures were not the decisive factor. In the end, what made the Hungarian government reconsider its decision was the pressure from authorities of RTL's country of origin- Germany. We can only guess what Viktor Orbán and Angela Merkel discussed in their conversation, but we do know what the outcome of that dialogue was. In 2015, Budapest backed off and withdrew from its idea of taxing self-promoting material and imposing a progressive ad revenue tax on media outlets.

The tax itself, however, remained in force. Depending on their income, today, media outlets in Hungary pay an advertising tax at two rates – 0% and 5.3%. As for RTL Klub, the TV station remains out of reach for the Hungarian authorities.

In the meantime, however - even though Orbán partially backed down under Berlin’s pressure – the complaint of the European Commission filed with the CJEU was still being processed. In 2017, the Court of the first instance ruled that the tax progression, as applied to sectoral taxes, does not violate the principle of non-discrimination of companies. The Commission has appealed the decision. While the case is still pending, everything suggests that the court of the second instance is likely to uphold the ruling in mid-2021.

That doesn’t bode well for independent media in Poland and Hungary. It means that the EU law is weak when it comes to protecting them from a repressive advertising revenue tax. Citing the CJEU ruling, PiS will be free to go ahead and harass critical media by introducing murderous tax progressivity, including the kind that Orbán withdrew from under Chancellor Merkel’s pressure.


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