Here it Comes – Internet Tax Beginning with Hungary*
By Andrea Fiscutean
Hungary is planning to tax internet traffic from the beginning of 2015, according to a bill submitted to parliament on Tuesday.
The draft bill stipulates that ISPs will pay 150 forints (€0.49) for every gigabyte of data traffic over their network. Hungarian authorities have said that they will make sure that the new tax will be paid by ISPs only, rather than internet users themselves.
The legislation is facing harsh criticism from both consumers and companies, and a street protest against the bill has been planned for later this week. An ‘internet tax’ will send Hungary back to the 1990s, the country’s opposition E-PM alliance said in a statement.
Other critics say the plan could hamper Hungary’s economic development, reduce the freedom of the press and bloggers, and further increase economic differences within the population, the Budapest Business Journal reports.
In its current form, the draft bill does set a maximum amount an ISP will pay, according to the Wall Street Journal. However, the Hungarian economy ministry has suggested that the government may impose a cap.
Economy minister Mihaly Varga said in a press conference that the new tax will generate annual revenue of 20 billion forints (€65m).
Internet traffic last year in Hungary was about 1.17 billion GB, an amount of data that would make a revenue of 175 billion forints a year (€570m) without a cap,according to consultancy firm eNet. During the same period of time, the internet service sector had a revenue of 164 billion forints, the Central Statistics Office notes.
“We think it is practical to introduce an upper limit in the same fashion and same magnitude that applied to voice-based telephony previously,” the ruling Fidesz party’s parliamentary group leader Antal Rogan told Reuters.
The country’s largest telecommunications company Magyar Telekom alone could end up paying 10 billion forint (€32.5m) a year if this bill does not come with a cap, analysts at Equilor Securities told the publication. The Deutsche Telekom subsidiary has come out in opposition to the bill, saying it should be revoked as it affects service providers, individuals, companies and the public sector, according to the WSJ.
The government’s plan to tax every gigabyte of internet traffic shook the Budapest Stock Exchange.Budapest Business Journal reports that shares in Magyar Telekom, majority-owned by Deutsche Telekom AG, lost 4.02 percent on Wednesday and reached HUF 334, a more than four-month low.
Hungary already has a tax on phone calls and text messages, but the maximum amount paid is capped. Individuals pay a maximum of 700 forints (€2.27) a month, while companies have a 5,000 forint (€16.26) limit, according to Reuters.
The draft bill has drawn opposition from consumers and companies. A protest is scheduled on Sunday, in Budapest, with 24,000 people already signing up to attend on Facebook.
Hungary’s IT, Communications, and Electronics Enterprise Association (IVSZ) asked the government to cancel the plan saying that the tax would obstruct the development of the internet infrastructure throughout the country, Budapest Business Journal reports.
“The real losers of the internet tax are not the internet companies but their clients, users, and all Hungarians who would now access the services they have used much more expensively, or in an extreme case, not at all,” the group said.
Krisztina Rozgonyi, the former head of the Hungarian telecoms regulatory body, joined the protesters and said that “the current government is continuing its policy of increasing inequality, obstructing social mobility, and putting a leash on creative industries, democratic movements and people who value freedom of speech”.
By Amar Toor
Hungary has decided to suspend a controversial plan to tax internet data transfers, after the proposed policy sparked large protests earlier this week. As Reuters reports, Prime Minister Viktor Orban announced told Hungarian media today that the so-called internet tax will be withdrawn from the country’s draft budget, and that a tax on money earned online will be revisited next year.
“This tax in its current form cannot be introduced because the government wanted to extend a telecommunications tax, but the people see an internet tax,” Orban told Radio Kossuth Friday.
“If the people not only dislike something but also consider it unreasonable then it should not be done… The tax code should be modified. This must be withdrawn, and we do not have to deal with this now.”
The proposed tax would have seen internet service providers pay around $0.62 per gigabyte of transferred data. Officials estimated that the policy would bring in about $8 million in additional revenue, though others pegged the total as high as $720 million. Around 100,000 demonstrators took to the streets of Budapest on Tuesday to protest the plan as well as the broader policies of Orban’s central-right government, which many see as increasingly authoritarian.
Speaking to Hungarian radio, Orban said the government will discuss internet regulation and taxation again in January, with talks concluding by the middle of next year.
“There are two questions,” Orban said.
“The question of internet regulation, what can and cannot be done, and the financial questions of the internet. We really should see somehow where the huge profits generated online go, and whether there is a way to keep some of it in Hungary and channel it into the budget.”
Neelie Kroes, vice president of the European Commission, welcomed Hungary’s decision to move away from its internet tax, describing it as a victory for Europe. “I’m very pleased for the Hungarian people,” Kroes said in a statement Friday. “Their voices were heard. I’m proud the European Commission played a positive role in defending European values and a digital Europe.”