More resolute foes of Orbán’s plans for Hungary come from unexpected quarters: Luxembourg and Norway

In the past four years most of the battles between Viktor Orbán and the European Union have ended with a victory for the Hungarian prime minister. Or, if the Budapest government was forced to make changes in some of its controversial laws, they usually smuggled in other equally controversial provisions while allegedly fixing the problems with the first version. Eventually, the “bureaucrats” of Brussels, worn down, were satisfied with superficial, inconsequential changes that did not matter as far as Viktor Orbán’s long-range plans were concerned. But now he is confronted with other kinds of foes: Norway, which does not belong to the European Union, and the Luxembourg-based RTL Group, Europe’s leading entertainment company which is majority-owned by the German media conglomerate Bertelsmann. Neither of them seems to be a pushover.

I was surprised to see that almost three weeks had passed since I first wrote about the war between the Hungarian government and RTL Klub, the Hungarian subsidiary of RTL Group. At that time I reported that the Hungarian government had proposed a bill that was designed to tax the advertising revenues of all media outlets on a sliding scale depending on profitability. RTL Klub is the most profitable television station in the country and hence would get hit the hardest. In fact, the proposed tax of 40% on its revenues could cripple it. Since more than half of all revenues from the advertising taxes would come from RTL, it became evident fairly early in the game that the whole bill was designed to target this particular television station.

The answer from RTL Klub was swift: the news editors decided to spend more time on political news than before, and they made sure that every day there was some story that reflected badly on the government. The government answered in kind. Mihály Varga, minister of national economy (basically the minister of finance), instructed the Nemzeti Adó- és Vámhivatal (NAV/National Office of Taxation and Customs) to examine the tax history of RTL Klub because, as he put it, “there is a suspicion that some of the transactions of Magyar RTL Klub in the past years are fictive; they don’t reflect actual business activity but are designed solely for tax write-offs.” It was at this point that an MSZP member of parliament charged that Hungary was no longer a country of law  (jogállam). The government was using the tax authorities to “punish” companies not to its liking.

The management of RTL didn’t cower. They told reporters that NAV has been after the company constantly. By now they have a department that deals only with tax matters. They have nothing to hide, and they invited NAV to come and investigate. It turned out that the “suspicious transaction” was a 2011 loss of 23 billion forints. The loss came about in the following way. RTL Klub purchased two cable companies which a year later were sold to its parent company. Apparently this transaction is a perfectly legitimate business practice. Because of this loss, RTL wouldn’t have to pay advertising tax this year. And that cannot be allowed.  Thus, the government had to come up with some other way to get to RTL.

Source: http://www.targetgdpi.com/

Source: http://www.targetgdpi.com/

So came the old Orbán trick. If the law for one reason or another doesn’t have the desired result, let’s change the law. And indeed, as one newspaper put it, before the ink had even dried on the bill came an amendment according to which a company would be exempt from the tax this year only if its profits were either zero or negative in 2013. Clearly, this amended bill targets only RTL Klub. As László L. Simon, the man who presented both the original bill and its amendment, said, Hungarian newspapermen were the ones who called attention to this loophole. Since the government wants to make sure that everybody pays an equal share of the tax, they decided to change the bill.

Yesterday L. Simon for a solid 17 minutes tried to explain the intricacies of his amendment to the audience of ATV while a helpless young reporter sat and listened without interrupting him. He was less lucky when he made the mistake of giving an interview to RTL Klub. As a result of this interview it became evident that L. Simon doesn’t know what is in his “own” amendment. So much for law making in Hungary.

The RTL Group refuses to throw in the towel. Only yesterday a long interview appeared with Andreas Rudas, the director responsible for South-Eastern Europe, who as you might suspect from his name has a Hungarian background. He made it eminently clear that what is going on right now “is not a question of money” as far as the RTL Group is concerned. The firm is ready to stand by media freedom and to go to the highest courts to win against the Hungarian government.

During the course of the conversation we learned that Lis Mohn, the widow of Reinhard Mohn who was the owner of the media conglomerate Bertelsmann, serves on the supervisory board of the firm. And what is also important is that she is a good friend and supporter of Angela Merkel. Rudas revealed that he knows that the topic of what is going on with RTL Klub in Hungary is being discussed in Berlin as well as in other European capitals. RTL Klub is prepared to sue and they don’t care how much it will cost or how long it will drag on. It seems that Orbán has found his match in the business world.

Equally resolute is the Norwegian government. On June 25 a letter was sent to the Prime Minister’s Office which was brief and to the point concerning the suspension of the Norwegian Grants. No lifting of the suspension can take place until the demands of the Norwegians are met, which include the immediate cancellation of “the on-going audit by the Government Control Office.” The letter added that the “audit of the Hungarian NGO program is the responsibility of the Financial Mechanism Office in Brussels.” Well, that is clear enough. No answer has come yet from János Lázár’s office. As Népszabadság commented on the situation: “Lázár and Co. ran into a cement wall.”

In both cases we will see who will break his head first on that cement wall.

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Istvan
Guest

While the headquarters of the RTL group may be in Kirchberg, Luxembourg the primary ownership is the German media conglomerate Bertelsmann as Eva noted which has a 75.1% stake in the publicly listed company. The current chairman of the RTL group was however born in Luxembourg, but the fact that it is located in Luxembourg is primarily based on tax laws.

Because RTL is part of the German capitalist foreign monster makes it is easy ideological pickings for both Fidesz and the Jobbik. So arguments about media freedom in this situation are being undercut by generalized hostility to German economic domination of the Hungarian economy even through Fidesz takes no real action to promote real indigenous firms and continues to support Hungary being a low wage parts supplier to German industry. The left/liberal arguments on the media tax law are not gaining traction and Fedesz is wisely using that opposition to associate the left/liberals with rich foreign corporations. Sadly it’s a very good strategy.

GyorsVonat
Guest

orban team is fooling the public with various PRs.
their only goal is to create shady deals, like mine and construction projects for themselves.
the public will be kept busy with PR.
very little noise was generated on corruption during the election.

petofi
Guest

@Istvan

“Sadly it’s a very good strategy.”

Yeah, right, but not for Hungary…perhaps if you’re a Russian surrogate.

Again, Orban is doing the unthinkable–attacking the major economic support of the country: Germany. But let’s follow this strategy just a bit: lose Germany and you’re forced to rely
on only one source of support–Russia.

Hajra Viktor! Hajra Magyarok.

Ron
Guest

It is not about the new foes, but also the old ones. Like the Excessive Deficit Procedure.

http://www.bloomberg.com/news/2014-07-01/eu-warns-hungary-of-deficit-procedure-risk-on-rising-debt.html

And of course the Foreign Currency Loans debacle.

http://online.wsj.com/articles/hungarys-currency-weakens-on-government-plan-to-convert-loans-1404237443

D7 Democrat
Guest
“Because RTL is part of the German capitalist foreign monster makes it is easy ideological pickings for both Fidesz and the Jobbik. So arguments about media freedom in this situation are being undercut by generalized hostility to German economic domination of the Hungarian economy….” RTL is the most popular TV station in Hungary and without wanting to over-generalize, its typical viewer is not going to be over-bothered about the concept of press freedom or indeed the threat posed to Hungarian nationhood from German capitalist monsters. Indeed, I don’t think the management of RTL are that bothered about the concept of press freedom or they would have spoken out before about the Orbanist rape of the free media. This battle is all about money from their side anyway. But that is not the danger to the regime here; RTL have the means at the moment to brioadcast what they want about the regime and what they broadcast is watched and believed by their typical viewer. RTL have started dishing the dirt on Fidesz, it’s sure that they have more damaging stuff and they all have the financial resources to go out with a bang. If they do have to close shop,… Read more »
petofi
Guest

@D7 democrat

“….people who don’t respond to their intimidation…”

And who might that be?

Oh yes, a lot of clamoring opposition…so why am I experiencing the deafness of their silence?

HiBoM
Guest

A surprising number of people confuse profit with revenue. And Orbán and co are playing on that. It is worth stressing that this is a 40% levy on money that RTL gathers for its running costs.

qaz
Guest

RTL has no moral standing to wrap itself in righteousness and to invoke media freedom. They are only reacting to an attack on their pocketbook, not on principles.

The tirade of pastor Niemöller “First they came …” comes to mind. Where was RTL when the gang rape of media freedom took place?

UjOtlet
Guest

rtl has been passive until now, but the giant woke up from it sleep.

go rtl…..

start a reality show against the orban clique!

Karl Pfeifer
Guest

@qaz@ when one is threatened in a den of thieves (in the postcommunist maffiastate) and is defending itself, it is legal and desirable.

tappanch
Guest

The oxymoron called “Constitutional Court of the Hungarian Republic” (there is neither a constitution nor Hungarian Republic since January 1, 2012) has approved, with minor objections, the fideszization of the credit union system.

Fideszization [my term] means nationalization, followed by privatization to Fidesz friends and family.

Sources:

http://mkab.hu/download.php?h=871

http://mkab.hu/sajto/kozlemenyek/az-alkotmanybirosag-kozlemenye-a-szovetkezeti-hitelintezetek-integraciojanak-alkotmanyossagi-vizsgalatarol

http://index.hu/gazdasag/2014/07/02/ab_rendben_van_a_takarekok_integracioja/

Karl Pfeifer
Guest

@tappanch@ thank for this spot on definition:Fideszization [my term] means nationalization, followed by privatization to Fidesz friends and family.

LwiiH
Guest

@tappanch,

Parts of the ruling in English…

“the state can impose restrictions on the freedom of association and right of ownership for a greater public good.”

equates to; we can take what we want…..

“In this specific case, the benefits arising from coordinated operation of savings cooperatives outweigh the negatives inherent in the restrictions, the verdict stated.”

Didn’t the 50 years of communism teach these guys anything about the downsides of “coordinated operation”??? Oh right, the downsides aren’t for them, it’s for everyone else!!!

D7 Democrat
Guest

“And who might that be?”

Petofi,

Well, we do have a sad lack of “Oh yes, a lot of clamoring opposition” but if you were a little bit more familiar of the NGO and charity scene then, I believe, you would have been a little bit less dismissive of the (sadly) few individuals and organisations who are preentlyu standing up to Orban’s bully boys and thugs.

They don’t get one hour documentaries on M1 (obviously) and the official so-called political opposition have completely abandoned them, not even sexy enough for Index.hu or 444! to cover… but.,.. there are NGOs which despite the constant sight of state-sanctioned football hooligans constantly standing outside their offices, despite the 2.00am *strange* phone-calls, despite the countless NAV raids still continue to refuse to bow the knee to the regime.

A little bit more appreciation or research of these brave souls’ work wouldn’t do you any harm. Might even give you a bit of optimism about the future.

ot
Guest
“news editors decided to spend more time on political news than before, and they made sure that every day there was some story that reflected badly on the government. ” So you are saying RTL is manipulating their own news coverage and using it as an extortion tool. Before the tax there was no change in coverage and no “attack stories”. And after they have to pay a new tax they “make sure every day that stories reflect badly on those who tax them”. The message is simple and it is not even about Hungary or this pittance of a tax. The Corporation that owns RTL has tens of billions of euros worth of revenue a couple million euros is nothing to them. The point is to scare every other country away from following the example of Hungary. The other countries will know never to dare taxing RTL. If they vote for a tax increase against RTL they will be attacked every single day. That alone explains why RTL is doing this. They can’t stop this miniature Hungarian tax, but they can stop a potentially large tax elsewhere. The goal is for everyone to be very afraid of taxing RTL… Read more »
SokKisLepke
Guest

List of the Norway fund supported organizations: https://norvegcivilalap.hu/en/tamogatott

There is no reason to celebrate this picture.

Even in resistance, or in opposition to orban, we need scale.

These dwarfs allow orban to flourish.

petofi
Guest

@D7 Democrat

I’ll take you at your word about peripheral unrest on ngos. But unless it (unrest) gets traction from greater numbers it can, and will, be painted as ‘foreign (jewish) interference’; and who’s to argue against that.

Optimism? You’re joshing. My view is particularly dark because I believe that the ‘paw of the great bear’ is behind a lot that is happening. And even worse, we live in a society that has no notion of decency as the ‘fulcrum for action’–everyone seems to be out for the main chance.
Oppurtunism, Greed, Envy….run amok. And when this, furthermore, receives the impetus of government encouragement…well, what hope?

joUtazast
Guest

petofi is right.
when i visit hungary, i see a lof of depressing looking people on street.
it is different in the free countries where people radiate happiness and self-confidence.
try to visit Tubingen for a refreshing experience.

Guest

London Calling!

“ot July 2, 2014 at 1:20 pm”

ot – your ‘trolling’ defence is unbelievably lame. You’ll have to do better than that if your paymasters want value for money.

And try and understand democracy a little? Your thug heroes need a little enlightenment. Janos Lazar might be feeling a little more humble after his run-in.

And the Chief Thug’s dad too!

Try a more subtle approach eh?

Regards

Charlie

qaz
Guest
@Karl Pfeifer “when one is threatened in a den of thieves (in the postcommunist maffiastate) and is defending itself, it is legal and desirable.” I fully agree, but let’s call the RTL situation for what it is: potentially a creeping (regulatory) expropriation that could lead to proceedings under investment protection mechanisms (probably arbitration under ICSD) provided the conditions for an expropriation are realized (the Hungary-Germany investment protection treaty only provide for arbitration in case of expropriation) meaning the investment is substantially destroyed. However, the taxes in question may render the investment unattractive and may economically strangle the Hungarian operations but will most probably not economically destroy it. They will make sure to let enough life in it. Our friends have learned their lesson from the time of the Budapest Airport debacle, which we are using now as a textbook example and required reading to illustrate what creeping expropriation is (the award is an interesting read but maybe only for lawyers). They are now marvelously well advised by highly competent investment protection attorneys; they know until where they can go and they do not cross the Rubicon (at least as far as investment protection is concerned). So back to the point;… Read more »
Guest

ot, our latest troll is really weak – will probably disappear again like the others after having been rebutted. I sometimes wonder what the hell are they trying to accomplish here – usually stupid lies, easy to repudiate …

Is their (Fidesz) intellectual level really that low?

Sure, RTL is a company that wants to survive i e make enough money to pay their workers and their shareholders. But Fidesz does not want any independent media company – whether large or small …

@ joUtazast – a bit OT:

I’m in Tübingen right now and we had a very lively discussion in my favourite bar this afternoon – and I also sold my friends some eggs (from my neighbour’s hens), paprika powder (home made by my brother in law), “Erös Pista” and “Piros Arany” – there are Germans who like it very much! Next time I have to bring tökmag olaj too – made in our village and really wonderful!

Légy észnél magyar
Guest
Légy észnél magyar

In every society there are always more than enough corporate mercenaries willing to defend obscene corporate profits until the last drop of blood. The last drop of the poor people’s blood.

Let’s not pretend that RTL is on our side, they are on the side of lining their pockets. The minute after their tax is abolished they go back to pushing stories about the two-headed cow if they think that will get them an extra 10 viewers. The idiocy, complacency and stupidity of the RTL viewing population that this company created by decades of hard work are the main reason we are in this mess to begin with.

While we can and must be happy that they are on the good side and doing real journalism during the last 10 days, let us not forget that they were destroying decency and intellectualism in Hungary for the last 15 years at least.

Guest

Légy észnél magyar:
“While we can and must be happy that they are on the good side and doing real journalism during the last 10 days, let us not forget that they were destroying decency and intellectualism in Hungary for the last 15 years at least.”

there will be more joy in heaven over one sinner who repents than over ninety-nine righteous persons who need no repentance (Luke 15:7)

Member

Let;s make one thing straight. It is not only RTL who will have to pay those taxes, but every small shop owners who advertise on Facebook or Google. Since Facebook and Google does not pay their taxes in Hungary, according to the new law (that Simon was not familiar with LOL) anyone ho places any advertisement in a media outlet that does not pay taxes in Hungary, is responsible to pay the advertising taxes! So, the small business owners will raise their prices in Hungary to pay the tax to Fidesz = Orban lied about taxing the rich companies!

Member
It is very hard to keep up wit the speed of the Hungarian parliament. In my previous post I wrote about he new law that makes everyone to pay an advertising tax. AT the first law, there was no such paragraph, but a few days later they passed a new law saying just that. Actually it said anyone who advertises over 25,000 Ft/month (about EUR 80/month) shall pay the tax on behalf of those media outlets that don’t pay taxes in Hungary. Well, the third law is just going into the parliament that will correct tat 25,000 Ft to 2,500,000 Ft/month (EUR 8000). THat was one thing that the government’ news organization mixed up a few billion Forints before with millions when accusing RTL’s management for taking home that kind of money when poor Hungarians are suffering. It turned out that “accidentally” they added a few zeros to the numbers. Now, the joke is in the parliament. THe Fidesz puppets passed a law with 25,000 Ft, and then they figured out that it is actually 25,000,000 Ft. That did not stop any of the monkeys to press buttons, just to be approved by their master. The Fidesz government with their… Read more »
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