Even as concerns over the power of Big Tech grow across the globe and European governments mull ways to regulate the industry, Hungary is the only nation in the European Union that is taxing international digital giants.
In addition to the European Court of Justice, the Hungarian Curia (Supreme Court) also considered the Hungarian Advertising Tax Act to be appropriate, Secretary of State for Taxation of the Ministry of Finance Norbert Izer told daily Magyar Nemzet in an interview.
He said that tech giants cannot extricate themselves from Hungarian rules, they have to pay taxes in the country they operate in. Using a well-known phrase from video games, he said “for them, this is game over”.
International community failed where Hungary succeeded
Izer reminded that while international efforts failed, Hungary managed to create a system of tax rules that will stand the test of law. He said that in 2018, the European Commission made a proposal on the introduction of a special revenue-based tax based on turnover. The elaboration of the technical details has also begun, but the finalization of the directive stalled in mid-2019.
Strong resistance from some member states has also contributed to the suspension of the process. Meanwhile, under social and political pressure, special tax based on a floundering EU proposal has been developed or introduced in several EU countries, but its application has also been suspended — partly due to US pressure and partly because a set of rules has begun in the OECD. There may be some progress in the latter process in the summer of 2021.
In Hungary, the advertising tax changed in 2017, and the amendment allowed the Hungarian tax office to set a presumed tax of 3 billion forints (€8.34 million) at the expense of the publisher who did not submit a tax return. In addition, the office may impose repeated and increasing penalties for non-compliance with advertisers who fail to comply with one of their most important obligations, i.e. not reporting to the authority.
Google and others
The point is, however, that Google, like other large global companies, is subject to the Hungarian tax, would have had to register and pay the advertising tax in the same way as other players in the market established in Hungary, Izer said. Answering the paper’s question about the likes of TikTok, YouTube and Facebook, Izer pointed out that the regulation was not targeted at specific companies
“In fact, company names don’t matter. No matter which international company it is, none of them have a choice,” Izer said. “If the conditions are met, you will have to pay tax in Hungary, and it does not depend on your name, where you are registered or how much of the market you control. The Hungarian Advertising Tax Act cannot be circumvented. Currently, the Hungarian advertising tax is the only nation in the European Union that a court has ruled that it taxes digital companies in accordance with EU law.”
