Eastern approaches | Hungary's internet tax

A bit of protest

Viktor Orban's planned internet tax unleashes torrents of protest

By A.L. | BUDAPEST

Hungarians protesting a proposed internet tax in Budapest

UPDATE: On October 31st Viktor Orban announced he was cancelling the plan to introduce an internet tax in its current form. Mr Orban said he would launch a "national consultation" on internet regulation in January, to look for ways to tax some of the "huge profits generated online".

VIKTOR ORBAN has finally hit a speed bump. The popular Hungarian prime minister had been on an unstoppable roll this year, winning a two-thirds majority in parliament and waving off foreign criticism of his increasingly illiberal policies. But this week Mr Orban and his governing Fidesz party suddenly faced an unaccustomed sight: tens of thousands of protestors in the streets of Budapest (pictured). The demonstrators were riled by a planned tax on internet usage, which the startled government promptly announced it would cap. For the first time in a long while, there appear to be limits to what Mr Orban can do.

The government announced its plan to levy the world's first internet tax on October 22nd. It would charge users 150 forints (62 cents) per gigabyte of data—a substantial sum for a family with several smartphones and laptops, in a country where the average monthly wage is $950. The Facebook page "100,000 against the internet tax" quickly garnered more than a quarter of a million likes, and by Sunday demonstrators were in the streets. The protest on Sunday, and the even larger one on Tuesday, were mostly peaceful, although a small contingent of demonstrators attacked Fidesz’s headquarters, throwing old computers at the building. Substantial protests also took place in many provincial cities.

After Sunday’s protest Fidesz announced that the tax would be capped at $2.90 per month for individuals and $20 per month for companies. It would be paid by telecoms companies, who would be strictly forbidden from passing it on to their customers. (How to prevent companies from passing on costs to customers is a riddle that may leave economists scratching their heads.) But the move is unlikely to mollify the protestors. Even right-wing journalists, such as those at the conservative blog Mandiner.hu, have criticised the proposed tax. Fidesz MPs, too, say the announcement caught them by surprise.

The furious reaction against the tax owes much to the belief of internet users everywhere that they are entitled to free data. But protestors say it is also connected to dissatisfaction with the government’s increasing authoritarianism in other areas. There is particular concern at recent police raids on non-governmental organisations and civic groups funded by Norway. Those measures led American president Barack Obama, in a speech in September, to bracket Hungary with countries such as Egypt and Azerbaijan for its restrictions on civil society.

The Fidesz government also faces more concrete problems with the Americans. Earlier this month Washington issued entry bans for six prominent Hungarians it accuses of corruption, either high-level government officials or people connected to the government. (Their names have not been officially released.) American officials said the bans were a warning to Hungary to halt its slide into authoritarian illiberalism, which Washington's chargé d'affaires in Budapest, André Goodfriend, called "this downward trend in its own society". The Hungarian government asked America to provide evidence for the allegations so that it can take action itself. In the meantime, government spokesman Zoltan Kovacs got into an angry Twitter exchange with Mr Goodfriend after he was spotted attending the protests on Sunday; the American said he had simply gone down to the demonstration to get his fair share of the views.

The European Commission, too, has condemned the proposed tax as a brake on civil liberties. A spokesperson called it “part of a pattern…of actions which have limited freedoms or sought to take rents without achieving a wider social or economic interest.” Hungarian officials deny any such attempt to restrict freedom. Mr Kovacs said the proposed tax is an extension of an existing telecommunications tax, part of the government’s strategy of “burden-sharing”. Hungary has introduced a series of such so-called "sectoral taxes" in recent years, including taxes on banks and advertising. Those taxes, too, have often drawn fire from Brussels.

Not all reaction has been critical. Leonid Bershidsky argues in Bloomberg View that there is no logical reason why data should be exempt from taxes: “If governments choose to tax consumption in general—and most of them do, through value-added or sales taxes—it’s logical to tax data consumption, too.” The final wording of the law will probably be decided in December, and Mr Kovacs told the Economist that suggestions from businesses and civil society will be fully considered. But for most observers, Mr Orban's internet tax fits into a pattern of using taxes and regulations as levers to control independent economic and social activity, part of what Mr Orban this summer called a move to turn Hungary into an "illiberal state". And while previous protests against Fidesz have faded away after a few weeks, the internet levy may just be a tax too far.

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