Eating bread or eating nothing: Why neither side is backing down in Hungary's internet tax battle

As Hungarians take to the streets to protest about a proposed levy on internet traffic, both sides set out their arguments.

The Hungarian government's proposal tax internet traffic has sparked protests from locals on the streets and from officials of the European Commission. In an effort to lower tensions, the government of prime minister Viktor Orban has proposed an amendment to the legislation that would cap the fee payable per customer. However, the opposition is still unimpressed with the olive branch, and the government looks like to have ended its attempts at concession-making.

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According to last week's draft bill , internet providers were to pay 150 forint (€0.49) per gigabyte, which would be unique in Europe. Since then, after protests against the plans started , an additional amendment has been proposed capping the fee to 700 forints (€2.27) per individual customer per month, and 5,000 forints (€16.20) for businesses. The proposal is one part of a government budget dealing with the country's income to be voted on by parliament in the first half of next month. The other half of the budget, concerning expenditure, will be accepted at the end of November or early December.

However, a representative of the main group protesting the the new law has rejected the amendment, saying that they won't rest until the "internet tax" is completely off the table.

"The key issue is that many people within the government are digitally illiterate," Daniel Fazekas told ZDNet. "It is said of prime minister Orban himself that he does not see the difference between an email and a fax. Concepts such as cloud computing and big data are completely alien to them."

A prime concern for the group, whose Facebook page hit over 200,000 likes during the weekend, is that internet freedom is at stake. "The whole discussion cannot be seen separate from the government's push to restrict media, Fazekas argues. "A couple of years ago there was the issue of Klubradio," a left-liberal news station. "While they survived the government's efforts to close it down thanks to EU and US pressure, they are only on an FM band in Budapest. In the countryside, you need to stream it. And that is where the tax comes in." That is, those who want to tune in to a voice opposing Orban's government will run up an extra bill courtesy of the incoming tax.

Also, Fazekas fears for the country's nascent startup scene, where some companies are already operating at a loss. "Startups like Logmein and Prezi have started investing a lot into the ecosystem. For them, that 5000 forints a month is just another hurdle. [Government officials] just don't see what their actions will bring about."

The draft bill stipulates that the financial burden is not to be carried by customers, but by the ISPs instead.

Government, parliament and regulatory institutions are to act as watchdogs, according to a spokesman for the Hungarian government. "We set up rules; monitor the whole process in detail to uncover hidden fees."

The spokesman also denies that the law is unique or detrimental to internet freedom. "It is comparable to VAT, and in that sense also established in the United States. It is a technical taxation issue that has nothing to do with the freedom of the internet," he said.

Criticism voiced by the outgoing EU commissioner for digital agenda Neelie Kroes and the US charge d'affairs Andre Goodfriend, is purely politically motivated, the spokesman added. "We strictly separate taxation technical issues from political issues," he said. "We refuse any criticism based on political opinion, because it has nothing to do with the freedom of the internet." He continued that the government is planning to invest "hundreds of billions of forints for the coming years in this field, in order to improve internet access in rural areas. [Government broadband initiative] Digital Hungary aims to get all Hungarians access to broadband internet."

The argument that ISPs will have to carry the financial burden does not ring true with the protesters. "They always say that, but it is bullshit," Fazekas said bluntly. "We have seen it with banking fees and other issues that at the end of the day, the consumer has to absorb the extra costs. Liberty Media or Deutsche Telekom may offer a good service, but are no charities."

In the end, he fears, accessibility to the internet in poorer areas will be under threat. "If an ISP bill costs, say, €12, than a rise of €2 to €3 is quite a lot, especially for people having to live on around €200 each month. It is the difference between eating bread or eating nothing at all," he said.

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