(Adds more comments from official in Prime Minister’s office)
* EU Commission has raised concerns over progressive tax
* RTL has said tax would drive it from Hungary
* Proposal for tax cut comes a day after Merkel’s visit
BUDAPEST, Feb 3 (Reuters) - Hungary has proposed cutting a steep advertising tax and introducing a flat rate instead, the head of Prime Minister Viktor Orban’s office told national news agency MTI late on Tuesday.
The tax has hit the local unit of German media group Bertelsmann particularly hard. Last Friday, ahead of a visit by Chancellor Angela Merkel to Budapest on Monday, the government said it had met RTL and would consider the company’s concerns.
Janos Lazar, the minister in charge of Orban’s office, did not say what the proposed new tax rate would be, but said the proposal would be put to the ruling Fidesz party at a meeting this week.
Last year, Hungary levied a tax on media companies rising to 50 percent on revenue above 20 billion forints ($87.9 million) per year -- a level reached only by the Hungarian unit of RTL Group, which is majority owned by Bertelsmann.
Lazar told MTI that the European Commission had sent a letter to Budapest last month, saying that the progressive tax favoured companies with low advertising revenues, and the steep rate in itself could cause economic disadvantage.
RTL said last year that the tax was an attempt to force it out of business in Hungary.
Lazar said the Bertelsmann group had made a proposal worth considering, which took into account that the highest rate of advertising tax in EU countries was in Austria at 5 percent.
He said the government had been in talks with the German media group since November about an out of court settlement and the government had to weigh whether “it chooses an uncertain legal dispute, or a good deal”.
Lazar added that the issue should be settled within three months.
Since taking power in 2010, Hungarian Prime Minister Viktor Orban has clashed with his European Union partners and foreign investors over policies ranging from media reforms to “windfall” taxes on specific sectors of the economy. (Reporting by Krisztina Than; editing by Susan Thomas)