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Hungary plans cybertax

October 22, 2014

The Hungarian government has startled citizens and companies with plans for a new Internet tax. The resulting protests have forced Budapest into a partial climbdown.

Hungary's parliament in Budapest
Image: THOMAS COEX/AFP/Getty Images

The Hungarian government announced Wednesday that it will go ahead with controversial plans to impose a new tax on Internet data transfers next year, but the ruling Fidesz parliamentary party has also proposed a cap on the tax after an outcry from companies and customers.

Budapest said a cap could be used in the same way voice telephony is also taxed. The old telephone tax was capped at 700 forints (2.28 euros, $2.89) a month for private customers, and 5,000 forints for commercial users.

Golden data mine

The government's new draft code contains a tax on Internet providers of 150 forints per gigabyte of data traffic, though it also allows companies to offset corporate income tax against the new levy.

Budapest says it expects to raise 20 billion forints with the new Internet tax. That strongly suggests a cap, because other estimates put the possible take at 10 times that, based on data traffic statistics.

Economy Minister Mihaly Varga defended the move saying communications technology has changed the way people use telecom services and therefore the tax code needed to follow suit.

The latest in slew of new taxes

Prime Minister Viktor Orban's government has in the last few years imposed special taxes on the banking, retail and energy sectors as well as on telecommunications providers to keep the budget deficit in check. Some have argued this has jeopardized profits in some sectors of the economy and unnerving international investors.

Hungarian Prime Minister Viktor Orban
Hungarian Prime Minister Viktor OrbanImage: Reuters

Orban was reelected by a landslide in a much-criticized election earlier this year.

Within hours of the new Internet tax provision being published, more than 100,000 people joined a Facebook protest group against the levy. They feared providers will pass the cost on to end users. Thousands also plan to rally against the tax outside the Economy Ministry on Sunday.

bew/cjc (Reuters, AP)