Hungary is planning to tax internet traffic from the beginning of 2015, according to a bill submitted to parliament on Tuesday.
The draft bill stipulates that ISPs will pay 150 forints (€0.49) for every gigabyte of data traffic over their network. Hungarian authorities have said that they will make sure that the new tax will be paid by ISPs only, rather than internet users themselves.
The legislation is facing harsh criticism from both consumers and companies, and a street protest against the bill has been planned for later this week. An 'internet tax' will send Hungary back to the 1990s, the country's opposition E-PM alliance said in a statement.
Other critics say the plan could hamper Hungary's economic development, reduce the freedom of the press and bloggers, and further increase economic differences within the population, the Budapest Business Journal reports.
In its current form, the draft bill does set a maximum amount an ISP will pay, according to the Wall Street Journal. However, the Hungarian economy ministry has suggested that the government may impose a cap.
Economy minister Mihaly Varga said in a press conference that the new tax will generate annual revenue of 20 billion forints (€65m).
Internet traffic last year in Hungary was about 1.17 billion GB, an amount of data that would make a revenue of 175 billion forints a year (€570m) without a cap, according to consultancy firm eNet. During the same period of time, the internet service sector had a revenue of 164 billion forints, the Central Statistics Office notes.
"We think it is practical to introduce an upper limit in the same fashion and same magnitude that applied to voice-based telephony previously," the ruling Fidesz party's parliamentary group leader Antal Rogan told Reuters.
The country’s largest telecommunications company Magyar Telekom alone could end up paying 10 billion forint (€32.5m) a year if this bill does not come with a cap, analysts at Equilor Securities told the publication. The Deutsche Telekom subsidiary has come out in opposition to the bill, saying it should be revoked as it affects service providers, individuals, companies and the public sector, according to the WSJ.
The government’s plan to tax every gigabyte of internet traffic shook the Budapest Stock Exchange. Budapest Business Journal reports that shares in Magyar Telekom, majority-owned by Deutsche Telekom AG, lost 4.02 percent on Wednesday and reached HUF 334, a more than four-month low.
Hungary already has a tax on phone calls and text messages, but the maximum amount paid is capped. Individuals pay a maximum of 700 forints (€2.27) a month, while companies have a 5,000 forint (€16.26) limit, according to Reuters.
The draft bill has drawn opposition from consumers and companies. A protest is scheduled on Sunday, in Budapest, with 24,000 people already signing up to attend on Facebook.
Hungary's IT, Communications, and Electronics Enterprise Association (IVSZ) asked the government to cancel the plan saying that the tax would obstruct the development of the internet infrastructure throughout the country, Budapest Business Journalreports.
"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," the group said.
Krisztina Rozgonyi, the former head of the Hungarian telecoms regulatory body, joined the protesters and said that "the current government is continuing its policy of increasing inequality, obstructing social mobility, and putting a leash on creative industries, democratic movements and people who value freedom of speech".