Internet tax brings Hungarian protesters into streets

A proposed levy could drive data-hungry companies from the country, opponents said

In Budapest, Hungary, tens of thousands protested against a proposed Internet tax

In Budapest, Hungary, tens of thousands protested against a proposed Internet tax

Tens of thousands of people took to the streets in Hungary on Sunday night to protest against a proposed Internet tax that they say would limit freedom of expression and cripple some online companies.

The Hungarian government last week submitted a bill to parliament that calls for a tax of 150 Hungarian forint (US$0.62) on every gigabyte of data consumed.

Should it become law, the tax will undermine technological development and hurt companies, said a spokesman for a Facebook group that gathered over 215,000 likes since last week. It organized the Sunday protest that was attended by tens of thousands in Budapest.

Companies that process a lot of data would be especially hurt by the tax. One of might be the Wigner Research Centre for Physics in Budapest which has been acting as the main extension data center for CERN, the European Organization for Nuclear Research, since 2012. CERN's data center processes about one petabyte of data every day

If the tax bill is approved the Wigner center would likely have to close, according to the protesters. "It just proves the government has no idea what they are talking about," the protester's spokesman said, adding that many other companies including cloud services and Internet startups would have the same problems.

On Sunday night, Fidesz, the Hungarian conservative party which has a two-thirds majority in the country's national assembly and came up with the Internet tax plan, tried mollify the opposition. They planned to put forward a motion on Monday to cap the tax at 700 forints (US$2.88) per month which would only be paid by ISPs and not by subscribers.

Some protesters refused to be appeased. A fee of almost 3 dollars on a monthly basis though is a lot of money in Hungary where average gross wages amount to 235,200 forint (about US$966), the spokesman for the protest group said. Many people also live below the poverty line and they might not be able to afford certain Internet services when the tax is pushed through, he said. There will be another protest tomorrow.

The protesters were backed by the EU's outgoing Digital Commissioner Neelie Kroes who also voiced her dismay at the proposed tax. "Proposed internet tax in #Hungary is a shame: a shame for users and a shame on the Hungarian government. I do not support!," she said on Twitter.

Hungary is still ranked low among countries who tax ICT (information and communications technology), according to a report indexing taxes applied on ICT products and services by 125 governments from the Information Technology and Innovation Foundation. Imposing taxes on IT products and services raises costs for users and slows down adoption of new technology, the researchers said.

Governments often tax these products and services because they are relatively easy to tax and are seen as luxury goods. However, because these taxes limit growth, the net revenue benefits from taxing them are usually short-lived, the researchers said.

"Given these findings, the guiding principle for nations should be straightforward: eliminate discriminatory taxes and tariffs on ICT goods and services for either consumers or businesses," they said. "A clear way for nations to enable faster economic growth is to spur the use of ICT by businesses and consumers."

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, online payment issues as well as EU technology policy and regulation for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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