Quo vadis Hungary? Internet tax for 2015
Keep Calm & Pay Your Taxes

It has recently been revealed that the US government introduced an entry ban on Hungarian officials (most likely including the head of the National Tax and Customs Administration) as a result of corruption allegations. This was a widely debated, red hot topic across Hungary, until suddenly something else took over its place.

A few days ago, the Hungarian government proposed a draft law making changes to tax provisions, and the media has already exploded and masses of people have raised their voices against the new measures. But what is  it that has made  Hungarians so upset?

Having increased in 2012 the VAT to an all time high level of 27%, FIDESZ, the right-wing ruling party with absolute majority (over 2/3), now plans to levy an unprecedented 150 HUF (about 0.5 EUR) tax per each GB internet data traffic.

Ironically, in 2008 when the former leaders of Hungary first came up with the idea to tax internet providers’ revenues to invest the influx into the cultural heritage fund (the proposal was later dropped), FIDESZ was the first to go against the idea, damning the provisions as unacceptable.

Facebook – the battlefield

Within a few hours of the announcement of the new internet tax, several Facebook pages were created to voice dissatisfaction with the proposed measures. Hungarians stood up not only against the fee they would be asked to pay for using the internet, but against its effect, which would likely restrict access to the web. Commentators immediately took to the Facebook pages of Hungarian government officials, including that of the Prime Minister, Viktor Orban, requiring the withdrawal of the proposal. Tons of memes were generated, criticising the current situation in a sarcastic way, circulating around the (currently only service-fee bound) internet.

Critics of this policy claim that the government is seeking to curb citizens’ rights to freedom and the access to information in a country where the internet has remained almost the sole platform to express anti-governmental opinions and to reach unbiased news. In fact it seems fair to say that globally the internet has become a basic need in the technologically advanced 21th century.

Foreign voices

A leading US diplomat in Budapest warned of “negative trends” like the weakening rule of law and oppressing civil society. Neelie Kroes, Vice President of the European Commission (“Digital Chief” of the EU) tweeted about the Hungarian measures, calling it “a shame for users and a shame on the Hungarian government”, and stating “It is terrible that govt of #Hungary thinks it can reduce media freedom, target media owners and then tax the alternative. Wrong direction!”. In a recent tweet she “urged to join or support people outraged in Hungary”. The onerous tax provisions received broad international media coverage, from Gulf Times to Financial Times, generally labeling the proposal as anti-democratic and distortive.

Government response

Mihály Varga, Minister of Economy, after the harsh feedback, met the leaders of Hungarian internet providers to settle an arrangement. Nevertheless they failed to reach agreement which could satisfy both providers and consumers. Varga emphasized that he finds the new measures to be “fair”, while it reflects on those shifted from phone-lines to internet (by highlighting tax evasion by using internet-based phone services instead of regular, taxable telecommunication).

Seeing the mounting public anger, the ruling party proposed a cap of 700 HUF (2.3 EUR) on consumers and 5000 HUF (16.1 EUR) on companies. Still, it does not satisfy people’s needs, as not the fee itself is what creates the tension, but its obvious outcome.

Protest against the measure

On Facebook events were created to organise a protest against the new measures for Sunday. It did not go so smoothly, as some pages and organizers were – for some reason – banned from Facebook, after these events were created.

Despite all, at the end, over 35 000 people joined the demonstration on the social media site, and many of them gathered together in Budapest in front of the Ministry of Economy, and also in some other major Hungarian cities on Sunday evening. Equipped with pc parts, keyboards, and smart phones demonstrators protested against what they found unjust, demanding to repeal of the draft law.

This was one of the very few events where Hungarians, despite their political views, being right or left-wing, liberals or radicals could join their forces to stand up against the increasingly authoritarian regime in the county. (While some supporters of the government and even officials labelled the protest as a left-wing and liberal-party organized event.)

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The protests were more or less peaceful, while some minor violence (throwing stones and tearing shutters at the party’s central building) lamentably occurred, which the Hungarian government, in its later statement, condemned.

Diplomacy on the web – fight between the Hungarian Spokesperson and a US Diplomat

Mr Andre Goodfriend, leading diplomat at the US Embassy, Budapest (currently the US does not have an ambassador appointed to Hungary), also visited the demonstrations and tweeted about the ambience he experienced: “Interesting to see the nature of crowds in Budapest. Internet tax march seemed large & orderly w/good police support“ Later he added: “Seeing the news reports of vandalism during the march as well, which I condemn. Not as orderly as it seemed where I stood.”

In response to the latter, Government International Spokesperson, Zoltan Kovacs, engaged in a Twitter argument with Mr. Goodfriend, criticising him for being present at the site, that the American diplomat tackled in a pretty talented way with his comments, reflecting the government-organized “Peace Marches”, he also visited.  .

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(Writer’s comment: for those interested in “diplomacy on the web” I’d recommend to read the full thread – linked above -  that I enjoyed a lot, being sort of a funny conversation.)

Current situation

After the outbreak of public dissatisfaction, the government in Hungary are still not considering to withdraw the proposals on the internet tax. People in Hungary, on the other hand have not received a proper answer to their demands, hence tension is still going on.

More and more comments are calling for civil disobedience on paying the taxes and some hope to initiate a referendum against the measures, which the current government also used as a tool a few years ago, when the former party introduced a 300 HUF (1 EUR) service fee for health services/occasion.

It is still unclear what all this will lead to, or until when the public will allow the government to oppress them and consolidate an authoritarian regime in the county.