Hungary’s RTL faces tough taxes

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This article first appeared in cjr.org.

The government takes on the investigative news channel

Best known for reality shows like Jungle Camp and Big Brother, RTL, which bills itself as “Europe’s leading entertainment network,” has never been known for a quality news department in any of the 10 countries where it operates.

For the last seven months, though, its Hungarian station has become a popular investigative news operation.

What changed was an advertising tax levied on all media by Hungary’s increasingly polarizing Prime Minister Viktor Orbán last July. (The law passed congress without debate in record-speed.) The tax is progressive and written so that only RTL, which commands the highest ad revenue in the nation, was paying 40 percent of that income to the government.

When the tax was announced, the government said it needed more sources of income. But RTL officials said the high levy was punitively high and would put them out of business. That was the point, some opposition websites claimed.

“It is hard to see that the goal is anything other than to drive them out of Hungary. 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,” wrote Neelie Kroes, then-vice president of the European Commission in a blog post.

But the RTL Group, which is headquartered in Luxembourg, is owned by Europe’s largest media conglomerate, Bertelsmann. It has deep pockets.

“We have no plans whatsoever to exit the Hungarian market,” Oliver Fahlbusch, an RTL Group spokesman, said in an email exchange.

Instead, last summer, RTL Group officials filed an official complaint with the European Commission, saying that the effect of the tax challenged the freedom of expression, via a media that is independent of the government and the freedom of establishment for non-nationals. It noted that RTL’s share of the tax amounted to 80 percent of the intake the government received.

While waiting for the complaint to be processed, RTL Klub, as it is known in Hungary, turned its 30-minute tabloid-style newscast into an hour-long, hard-hitting program, reporting constantly on alleged corruption within Orbán’s right-wing political party, Fidesz, and the effects of government policies.

One piece claimed a former Budapest district council president and Orban associate approved the sale of roughly one-third of the district’s council flats and other property to cronies at a fraction of the market price. Another highlighted a home worth 80 million forints (about $300,000) that purportedly is owned by the 10-year-old son of government spokesman János Lázár.

“We never defined ourselves as ‘government-critical’ or ‘hard-hitting’ per se, but as independent, fair and impartial. And if you’re independent, you report about ‘what is,’ ” Fahlbusch said.

Dirk Gerkens, the station’s chief executive officer told Bloomberg he had received threats and has moved his family out to the country while he lives in a hotel in Budapest. He has also hired bodyguards.

Orbán’s government’s response to RTL’s new programing was to raise the advertising tax for RTL to 50 percent as of January 1.

Meanwhile, the Hungarian public appears to be enjoying the news. RTL’s average monthly audience share of 18-49 year olds during the evening newscast has risen 7 points in the six months since the program’s format changed.

Fahlbusch confirmed that the two sides were working on an agreement. He did not comment on a Reuters report that the ad tax would be a flat 5 percent for all companies.

He did say, however, that “the talks with the Hungarian Government have been about the advertising tax, not about the news coverage or programming policy of RTL in Hungary.”

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