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Hungary to impose world’s first internet tax

Hungary is preparing to impose the world’s first tax on internet usage in the latest example of the unorthodox economic policies being pursued by prime minister Viktor Orbán and his increasingly dominant Fidesz party.

Mihály Varga, economy minister, on Wednesday unveiled the plans, which include a charge of Ft150 (62 US cents) for each gigabyte of internet data consumed. Mr Varga said the tax – to be paid by internet service providers – was a logical extension of levies on phone calls and text messages the government announced in 2011.

Neelie Kroes, the EU’s outgoing digital chief, told the Financial Times the measures would damage Hungary’s digital economy. “Unilateral Internet taxes are not a clever idea. It will increase internet access prices for consumers,” she said, noting that Hungaryscored below the EU average for internet usage, broadband access and digital regulation.

“This isn’t going to help,” she added.

Opponents called for protests against the measure, which Péter Banai, state secretary, estimated would raise Ft20bn next year. A Facebook group set up to oppose the tax garnered more than 6,000 members within hours of its creation.

The internet tax is the latest among a series of controversial taxes and financial penalties introduced by Mr Orbán’s government in recent years as it seeks to restore the public finances and – critics say – punish opponents.

Earlier this year the government forced banks to compensate borrowers for “unfair” conditions on foreign currency loans issued before the Hungarian forint’s fall during the 2008 financial crisis. The move came after a windfall tax on banks in 2010 and a financial transaction tax introduced this year.

The government also imposed a new levy on advertising revenue in August that provoked accusations of media censorship. Independent TV station RTL Klub last week filed a complaint to the European Commission, alleging that the tax was designed to discriminate against the broadcaster.

Brussels has repeatedly clashed with the Fidesz government. Ms Kroes denounced the media advertising tax as an attempt “to silence dynamic debate” and “an attack on Hungarian democracy”.

Yet the party has continued to rise, despite controversial remarks from Mr Orbán in July about his desire to create an “illiberal state”, alluding to examples such as China, Russia and Turkey. His spokesman later said the remarks were misunderstood.

In municipal elections earlier this month, Fidesz won the mayoralties of all but one of the country’s 10 largest cities. During his victory speech, Mr Orbán promised to further squeeze the banking sector, which he said “must be held to account”.

Magyar Telekom, the country’s largest telecoms operator, said the draft bill implied a potential cost of up to Ft100bn for the sector and warned that broadband development would be “paralysed” by a charge of this magnitude. Shares in Magyar Telekom fell nearly 4 per cent to Ft334 hours after the announcement.

A spokesman for the Hungarian government said opponents of the tax were generating “hysteria” and said that parliament will agree a cap on charges for individual telecoms companies. He also rejected warnings that charging for internet usage would harm Hungary’s digital economy:

“This was the charge we heard about the telcom taxes; ultimately nothing was proved, just the opposite.”