Yesterday Freedom House published its latest report on the post-communist countries, “Nations in Transit 2014: Eurasia’s Rupture with Democracy.” Freedom House lists the countries by geographic region: the Balkans, members of the European Union, and Eurasia. It measures the performances of these countries by something it calls the “Democracy Score” (DS), which represents the average of a country’s seven democratization indicators: electoral process, civil society, independent media, national democratic governance, local democratic governance, judicial framework and independence, and corruption. In addition, it calculates an NIT rating for each country on a scale of 1 to 7, with 1 representing the highest level of democratic progress and 7 the lowest.
According to the report, the DS in all three regions has been steadily declining since 2010. As far as the NIT ratings (civil society) are concerned, only the Balkans countries show considerable progress between 2005 and 2014.
Among the new post-communist EU members (Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia) the country with the lowest DS score is Romania (3.46), followed by Bulgaria (3.25), but right next to it comes Hungary with a score of 2.96. Quoting the Orbán government’s slogan, one of the local newspapers wrote: “Hungary is performing better,” yes, better than Bulgaria!
The report states that the case of Hungary is “the most poignant reminder that democratization in post-communist Europe is neither complete nor irreversible.” By the end of 2013 Hungary’s DS score was one full point worse on the 1-7 scale than it was in 2004 when the country entered the EU. The report warns: “Any further deterioration in governance, electoral process, media freedom, civil society, judicial independence, or corruption under Prime Minister Viktor Orbán’s recently reelected government will expel Hungary from the category of ‘consolidated democratic regimes’ next year.“
And I’m afraid that given the events that have taken place since the national election in April, the likelihood of such an eventuality is almost guaranteed. The destruction of democratic institutions had been rapid even before the last election, but since then it has only accelerated. Two of the categories considered by Freedom House, civil society and the media, have been especially targeted in the last few weeks.
Earlier I touched on Origo‘s encounter with János Lázár, who apparently pressured the owner of Magyar Telekom, a subsidiary of Deutsche Telekom, to keep the popular online paper’s journalists in line and refrain from any overt criticism of the government. The firing of the paper’s editor-in-chief caused a greater uproar than the CEO of Origo anticipated. Fairly large demonstrations and mass resignations of editors and journalists followed. But that was not all. Simultaneously with the upheaval that followed the Origo affair, the government decided to levy very heavy taxes on the media based on their advertising revenues. It looks as if the government specifically targeted the German-owned RTL Klub, a subsidiary of the RTL Group, which is Europe’s leading entertainment company. It has interests in 54 television and 29 radio stations in 10 different countries.
It seems, however, that RTL Group is not going to take Viktor Orbán’s attack lying down and that it is ready for an extended war with the Hungarian government. Earlier there had been talks that the Orbán government put pressure on the German firm to sell the station but was rebuffed. Thus Orbán and his minions moved on to the second nationwide commercial television station, TV2. There the pressure worked because the station was actually losing money. In any case, the government’s extra levies on advertising will hit RTL Klub the hardest. More than half of all taxes will come from this one station. It looks as if this tax is a punishment for the RTL Group’s refusal to sell the station.
The CEO of RTL Klub, Dirk Gerkens, a German-Spanish businessman who has been running the Hungarian subsidiary for the last thirteen years, is a combative type who is well prepared for the “war.” As he said not so long ago, “if there is war, there will be war strategy too.” Since “the war” between the government and RTL has apparently been going on since the fall of 2013, the RTL management was well prepared for its latest counterattack.
A few hours after the announcement of the proposed advertisement tax RTL issued a sharply worded statement. Since then RTL reacts every time a government official says anything about the advertisement tax or RTL. The management indicated that if the financial squeeze of the station continues, they might have to take off some of the most popular programs: “Among Friends,” “X-Factor,” and “Budapest Night and Day.”
Lázár called RTL’s reaction “blackmail” and suggested to Gerkens that they should go back to Germany and blackmail the German government. Gergely Gulyás, chairman of the parliamentary committee on legislation, complained about the low quality of the two commercial stations, RTL Klub and TV2. As he put it, one should look upon this new tax on media advertising as a variation on the newly introduced tax on unhealthful foods, the “chips tax,” because these stations have a harmful effect on society. It didn’t take long for RTL to reveal that Gulyás at one point asked for and received a free ticket to the finals of X-Factor. Yesterday RTL Klub aired a fairly long segment on Lőrinc Mészáros’s billions, which was delivered in a decidedly sarcastic manner.
We don’t know what else RTL Klub has in its arsenal, but a journalist of 444.hu gave its management a few ideas. For example, in the very popular show, “Among Friends,” they can put in a few lines about politics. Someone asks “Uncle Vili” what he thinks of the decrease in utility prices and Uncle Vili responds: “They try to fool the plebs.” Other members of the team can be transformed into people who are suddenly very interested in politics and who make snide remarks about the government. In the other hit, “Budapest Night and Day,” the chimney sweeps no longer come to the apartment on Margit kőrút because they went bankrupt. A few characters die of smoke inhalation because Hungarian health care is in ruins. There is no garbage pickup because of utility price decreases, and dysentery spreads among the inhabitants of the apartment house.
But jokes aside, the Orbán government has been very dissatisfied with RTL Klub’s news even though liberal old timers in the media complain bitterly that one of the great sins of the two commercial stations is that their news covers almost no important items, with most of the airtime spent on tabloid and police news. The station naturally disputes this and points to RTL II’s newshour that caused friction between the Orbán government and RTL management in the past. Fidesz leaders complained that RTL II’s news was too critical of the government party, especially during the election campaign.
It will be interesting to watch the developments. It is possible that RTL Klub will be a great deal more forceful and effective than the European Commission has ever been when it comes to media freedom and the destruction of democratic norms.
I would call RTL’s response timid so far.
They will show their more substantive newsreel on their main channel for the first time – but at 11:30 PM!
Sure, Tappanch but it is still something.
I am not familiar with the tax laws in Hungary. I know that individuals pay a flat tax that is not progressive. I also know – I think – that foreign banks are taxed more than Hungarian banks. Now I know that advertisement revenue of TV stations is taxed on a progressive basis (are other media companies included, such as newspapers etc.?). How are the other businesses taxed?
“Among the new post-communist EU members (Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia) ”
I am saddened to see that Croatia after joining the EU recently was expelled from the group of EU members. Or maybe they weren’t Communist enough to be able to become post Communist?
No I don’t think that’s it, maybe the Freedom House experts are just not expert enough just not well paid enough to determine that Croatia is in fact a member of the EU. Even though they are – according to their score – already not a “consolidated democratic regime” whatever the hell may that mean. Still nevertheless the country is a member of the EU.
I suggest to readmit them after such harsh virtual expulsion.
tappanch – what is your advice for protest actions?
where are your loyalties?
gdfxx: How are the other businesses taxed?
Twice a year tax rates are reviewed and may be changed. The first towards the end of the previous year and once towards the middle of the year. Traditionally the tax laws are changed in order to meet the proposed budget. However, currently the tax laws are implemented/changed when required politically.
The are state and municipality taxes. Most relevant state taxes are:
Corporate Tax 10% (over first HUF 500 million profit) and 19% over the excess.
VAT (not applicable really for Corporate, but mainly end users, such as consumers. However, Corporate can be end user). Rates are 27%,for most services/products, 18% and 5% for reduced services/products. Reduced mainly for medical and education. Food stuff is not in the reduced rate in Hungary.
Dividend Tax 16%
The rates do not say everything some rates can be reduced under tax treaties, such as dividend tax, royalty tax and interest withholding tax.
However, in Hungary in general it is the tax base you need to worry about. What is tax deductible and what not. For Corporate Tax certain costs are not tax deductible, such as representations costs, and other “excessive” costs such as depreciation of non-payable debtors, and in some cases , you need to pay social security and VAT in order to make it tax deductible (typical business dinners).
Click to access dttl-tax-hungaryhighlights-2014.pdf
Soccer and hunger – a mural from Brazil.
I dedicate it to Mr Orban.
OT: A blog in The Financial Times on the tightening of financial conditions.
Graphic 1.15 places Hungary with the most weakest countries in the world in connection with vulnerability financially. I do not think this blog took into consideration Paks-2, than the picture could be more gloomier.
OT: Report of the Worldbank
Figure 1.15 previous comment on page 24 of this report (PDF alert).
About inflation in Hungary it is almost zero so why is Hungary put as one of the most vulnerable countries for inflation 2014. page 27 figure 1.23
Click to access GEP2014b.pdf
@ tappanch — I would call RTL’s response timid so far.
They will show their more substantive newsreel on their main channel for the first time – but at 11:30 PM!
A warning shot maybe?
Is it true that Jóska Szájer and Gergely Gulyás are an item?
@csopper, not impossible.
I wonder what the United States’ “Democracy Score” would be now. No doubt much lower than 15 years ago, following Florida 2000 and Citizens United.
And while I hope RTL wins this one (however unlikely against Orbán Inc.), who with a reasonably normal IQ would actually miss “Among Friends,” “X-Factor,” or “Budapest Night and Day”?
Who would miss M1, M2, Dunatv etc?
The quality of the programmes is abominable everywhere . in the USA exactly as in Germany or other European states. Many people just want panem et circenses!
@csopper I think Gulyás is too old for Jóska Szajer.
@nadas re the soaps on RTL and who would want to watch them. Obviously, not you or I but these programs are the most popular ones in Hungary.
I actually think RTL Klub could work from outside of Hungary. Among others it could be a Hungarian language Austrian channel operating for the Hungarian minority on paper and getting the advertisement fees in Austria and purchasing programs from Hungarian producers, although most of its movies are foreign anyway and could maintain only a cost center with some production studios in Hungary (which is not uncommon with high-tech companies with Hungarian roots which legally move their profit centers away from Hungary). It is much more difficult to tax tv program production by dozens of producer companies.
The point is that RTL – unlike Magyar Telekom’s mobile business – is not dependent on the state-provided air frequencies as most of its core viewers have cable/internet. Rural viewers may be lost if the frequency is taken away (although for that illegality would have to be proven), but those only matter PR-wise, not in terms of sales of advertising time.
Of course with Simicska/Nyerges’ money Fidesz could still purchase the cable operators (they can play this game of forcing the major players, like UPC to sell out to some shell company) and decide not to offer RTL Klub. But the viewers do want RTL Klub, and try as they might, TV2 could never offer the same quality of programming — except for perhaps the first year or two when TV2-RTL Klub started in 1997 and TV2 was more popular until RTL’s strategy to focus on the younger and more affluent viewers started to pay off.
TV2 just does not have the professional talent base to compete with RTL, one of the most experienced TV corporations, and it will never have that talent. Of course it can get better and Fidesz has a very comprehensive and long term media strategy so they will gain know how eventually underwritten by state-subsidies (in the form of unnecessary and above-market price advertising by state entities), but it is unlikely that TV2 (Fidesz) can ever beat RTL, television involves much bigger risks and investments than radio which Fidesz mastered.
Bread, circuses and sports!
A Roman Circus actually means not what we nowadays call a circus but a place for all kind of games, races, beast hunt, gladiators …
There’s a tv show called “Gladiators” based on that which is featured on Hungarian tv – very brutal.
So why am I thinking of “The Hunger Games”?
Maybe you know its precursor: The seventh Victim by Robert Sheckley which was turned into a Schwarzenegger movie ..
That might be the real thing for the Fidesz Mafia!
Ron:”Twice a year tax rates are reviewed and may be changed. The first towards the end of the previous year and once towards the middle of the year. Traditionally the tax laws are changed in order to meet the proposed budget.”
Very interesting. Just imagine an employee going twice to his/her boss and asking for higher salary because the furnace broke or a tree had to be cut…
How can businesses plan their activities under these conditions?
“Is it true that Jóska Szájer and Gergely Gulyás are an item?”
Whether they or not is completely their own business.
The problem is the hypocrisy then with staying in a party and government which is fascist and homophobic to the core but that is something for their not our conscience to sort out.
Regarding RTL, it has the capability, if it so desired, to do a lot of damage to the regime.
It knows the filth which the Fidesz Mafia wants to keep hidden from the sheep.
It also has the resources to do further digging and has the financial background and *smart lawyers* to take the Regime on.
However, I would be under no illusions as to RTL’s motivation if it ever decides to reveal that filth (ie it would be purely selfish) but it could be fun to see the likes of Lazar be thoroughly destroyed by the same kind of ruthless machinery which he has used to destroy so many lives in Hungary.
Not totally OT.
Watching RTL right now – another report on the mayor of Felcsút and what’s going on in Felcsút is on, lots of pictures of him and Orbán …
A statement from the Prime Minister’s Office:
It is inappropriate [helytelen] and unacceptable [elfogadhatatlan] that the [television] RTL Klub takes revenge on the father of the prime minister because it has to pay tax in Hungary
1. RTL Klub did pay taxes in the past, it is against the SPECIAL taxes levied against it.
2. The channel dared to quote the DK party in its news broadcast. DK demanded an investigation into the ways Orban’s father became a billionaire.
3. In my opinion, it is inappropriate and unacceptable for the government to interfere in the content of broadcasts, and curb press freedom.
So Orbán and his henchmen are getting nervous maybe?
That’s a good sign – and however they react, the world is watching!
And I’m sure there are a lot of people outside Hungary which are waiting for some blunder by Orbán’s government …
@Wolfi, your Hungarian is getting better and better.
Thanks, but I’m probably a hopeless case re all those words of six or even eight syllables that you find in official texts, though I can read, understand and even pronounce correctly simple texts, the Tesco ads for example …
The only really long Hungarian word that I use is:
öszzehasonlithatatlán – applied to my sweet wife …
@Wolfi, don’t worry, Hungarians themselves stumble over such long words ocassionally.
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