Hungary Suspends Plans for Internet Tax

After the Hungarian people took to the streets to protest, Hungary’s government today shelved proposals for a new tax on internet use, according to Reuters.

The government, led by Prime Minister Viktor Orban, originally planned to charge for every gigabyte of data used by the Hungarian people. Widespread criticism led to a watering-down of the proposals, with the introduction of a monthly cap on the amount that could be taxed. However, this was not enough to placate Hungarian citizens, who continued to participate in demonstrations around the country. As a consequence, Prime Minister Orban stated today:

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 This must be withdrawn, and we do not have to deal with this now.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 Hungarian government had promised that telcos would pay the tax whilst being prohibited from passing the cost on to consumers. This is a perfect example of politics ignoring reality in order to twist the truth of how governments raise money; the extra cash would have to come from somewhere, and telcos are not charities. Taxing the consumption of communication is a terrible deal for the individual, for businesses, and for the economy as a whole. The rapid fall in the cost of communication has fuelled economic growth worldwide, and enabled unprecedented social and economic mobility for countless people. Justifying extra taxes by observing that a lot of trade occurs via modern telecommunications is like applying the air brakes to a passenger jet because the plane will arrive at its destination much sooner than a ship would. The point is that we are always better off if we arrive sooner, and we are always better off if we communicate with each other.

Orban is not the first politician to try to levy a stealth tax whilst hiding behind communications providers. However, some other politicians now understand that the people benefit most from a free flow of information, unfettered by tolls and levies. European Commission spokesman Ryan Heath described the tax as “bad in principle” because it was a national tax applied to a global system. He went on to say it was:

…part of a pattern… of actions that have limited freedoms or sought to take rents without achieving wider economic or social interest.

Ordinary Hungarians have won this battle, but the fight is not over. Orban announced that his government would engage in public consultations about internet taxes and regulations. These consultations are promised for January 2015. Orban’s goal remains unchanged, as evident from how he described the purpose of the consultations:

There are two questions, 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.

Congratulations to Hungary’s people, who have defeated a harmful stealth tax. It is sufficient to tax telcos on the profits they make, like any other corporation. Individuals and businesses should not be taxed every time they communicate with each other, because communication is good for the economy, and good for society. Let us applaud this victory, and hope the Hungarians keep setting an example for all of us, in the ongoing political fight for cheap and unrestricted communication.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.