The Hungarian government has announced a proposed new tax on internet service providers that could dramatically raise consumer bills and affect the broader economy. The proposal, introduced by Hungary’s Minister for National Economy, Mihály Varga, has provoked widespread criticism from industry groups and the public.
Under the proposal, due to take effect in 2015, internet service providers would pay 150 forints (approximately $0.62 / £0.37) in tax for every gigabyte of data transmitted. As average data consumption and file sizes continue to grow, this per-gigabyte levy could impose a heavy burden on ISPs, discourage investment in network infrastructure, and translate into substantially higher costs for consumers.
Telecommunications companies warn that the new charge would significantly increase their operating expenses and could undermine ongoing broadband development. Magyar Telekom, one of the country’s leading providers, has suggested the levy could cost the industry as much as 100 billion forints and risk halting progress on network expansion.
Public opposition has been swift. Within hours of the draft being published, more than 100,000 people joined a Facebook campaign opposing the measure, and a rally was organized outside the Ministry of National Economy to protest the plan.
Government estimates put expected revenue from the tax at 20 million forints, but independent analysis indicates the actual take could be far higher. Consultancy firm eNet calculated that, based on Hungary’s estimated 1.15 billion gigabytes of internet traffic last year, the levy could generate as much as 175 billion forints (roughly $72bn / £45bn).
For context, annual revenue for the entire telecommunications sector in Hungary was reported at 164 billion forints at the end of 2013, according to the Central Statistical Office (KSH). Industry representatives argue that a per-gigabyte tax on top of existing sector revenue would have severely disruptive effects.
The Association of IT, Telecommunications and Electronics Companies commented that the true losers of the proposed tax would be end users: “The real losers of the Internet tax are not the Internet companies but their clients, users, and all Hungarians who would now access the services they have used much more expensively, or in an extreme case, not at all.”
Following the announcement, Magyar Telekom share prices fell, reflecting investor concern about the potential financial impact on the sector.
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