Hungarian Hoopla

By Global Tax Weekly

A tax on advertising is possibly an even more egregious offense against free trade principles than are anti-dumping duties. I thought that such dippy ideas had been junked along with Gosplan and the Marxist-Leninist Millennium, but I was wrong, because here it is, surfacing again in the EU’s equivalent of a Marx Brothers comedy, that’s to say, the Hungarian Government. They are seriously considering a tax on the revenue of media organizations of up to 40 percent. I really don’t know where to begin with this one. Presumably there is some undercurrent of moral disapprobation going on: that was certainly the case in the USSR, where advertising was seen as as a reprehensible feature of capitalism, and taxing it was therefore a virtuous expression of good Communist principles. But Hungary isn’t Communist. It teeters on the edge of becoming a dictatorship, and seems to have some fairly nasty fascist leanings, neither of which appear fitting for a Member State of the EU; but its economy is ruggedly capitalist. So what is the logic of trying to destroy the ability of companies to communicate with their customers? Especially perverse is the idea of taxing media companies more if they are more successful. Anyway, the results of this foolish proposal are easily predictable: first, all media companies will leave immediately and conduct their business in Hungary from outside the country. There is nothing the Hungarian authorities can do about this, within the single market. Second, advertising agencies will follow the media companies and will do business with them elsewhere. Those Hungarian media companies that cannot physically move – a newspaper with a printing plant in Budapest, say – will set up advertising sales subsidiaries outside the country and will offer space at knock-down prices to those subsidiaries in order to minimize the amount of in-country advertising revenue. And so on. You can work it out for yourself. There will be minimal revenue from the tax and very high enforcement costs. And all that is if the EU even permits the proposal in the first place, which is unlikely. What is wrong with these people?

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