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Analyst: Hungarian Parliament to weigh ‘Google tax’

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Under next yearʼs budget plan, which is due for a vote in Parliament in the next few weeks, foreign digital giants would be forced to pay taxes on advertisements that are posted on their sites and are seen in Hungary, according analysis published today by tax consultants RSM Hungary. This would mean the introduction of a so-called “Google-tax” by 2017.

“Passages related to advertisement taxes go along with the explanation that global tech giants should be required to pay taxes”, Zoltán Titusz Fekete, tax manager at RSM, says in a blog entry today. The expert says that, with the legislation the Hungarian government is sending a clear message to internet giants: beyond analogue advertising, digital players need to pay taxes, even if they do not reside in Hungary. Apparently this is technically possible due to legal changes taking effect in early 2015. 

Fekete notes that the explanation for the bill proposal says that foreign companies having activities in Hungary should not be exempt from contributing to bearing the public burden in the country. The government has lately been vocal about this stance, which follows trends elsewhere in Europe.

The notion is many times referred to as a “Google-tax”, because tech giants such as Google, Facebook or Youtube would be required to pay taxes on revenues that their sites earn by running advertisements seen by Hungarians.

According to the expert, Hungarian market players would definitely be happy about the introduction of the levy, however it is questionable whether the changes to the law will grant the government sufficient tools for making these giants actually adhere to the rules and pay the levy.

Fekete says that digital giants could be taxed, and also fined if they do not pay the tax, but collecting both the levy and the sanctions will be difficult. He explains that there is no clear legal mechanism for enforcing collection demands.

Citing the findings of a survey conducted by RSM, the expert says Hungarian market players clearly demand that the government create an environment ensuring neutrality when it comes to paying taxes on advertisements. Market experts participating in the survey noted that the law could lead to increased activities in the black market.

The expert emphasizes that related laws in Austria seem to be efficient in making companies pay their due. In Austria, if the owner of the domain is a foreign company, then the company ordering the advertisements has to pay the tax, and if the company ordering is a foreign one as well, then the advertiser should be charged for taxes.

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