Daily Tax Report: International

Google Gets Court Date to Argue Against Hungary’s Advertising Tax

May 13, 2019, 2:22 PM

Google Ireland Limited has been given a date by Europe’s top court to argue against Hungary’s advertising turnover tax, which it says unfairly targets companies based outside the country’s borders.

The Court of Justice of the European Union May 13 said that it will hear the matter June 4. Alphabet Inc.'s European subsidiary applied to the court July 24, 2018, for a preliminary ruling on whether Hungary’s tax violated the EU’s constitution.

  • The company’s application came after the European Commission said Nov. 4, 2016, that Hungary’s progressive advertisement tax gave companies with low turnovers an unfair economic advantage over competitors.
  • The ruling triggered a change in Hungary’s advertising tax to bring it in line with EU rules. But Google Ireland argued that despite the change, Hungary’s advertising tax still unfairly targets companies established outside of the country. Google says this violates Articles 18 and 56 of the Treaty on the Functioning of the European Union, which prohibit discrimination of taxpayers among EU member countries.
  • Google complained that under the tax, fines for non-Hungarian companies could be as much as 2,000 times greater than fines for companies established in Hungary.
  • It also pointed out that non-Hungarian companies are required to create local company registrations to establish if they are complaint with the tax, with the risk of fines if they fail to do this.
  • The procedure for a non-Hungarian company appealing a tax decision is administrative, Google argued further, while foreign companies have the burden of appealing a tax matter through courts where only documentary evidence is permitted.
  • Taxpayers may apply for a preliminary ruling from the CJEU ahead of a local court issuing a ruling on the same matter, within an EU member country. A CJEU ruling will supersede the local court’s verdict on matters pertaining to EU law.

To contact the reporter on this story: Hamza Ali in London at hali@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Penny Sukhraj at psukhraj@bloombergtax.com

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