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Hungary Plans Per-Byte Internet Tax

22 October 2014

The Hungarian government has introduced a draft bill showing it plans to tax Internet usage from next year by a per-gigabyte tax on internet service providers.. However, users are fearful that ISPs will pass the cost on to them and there are plans for a rally outside the Economic Ministry in Budapest on Sunday (Oct. 26).

The tax is set to be 150 Hungarian forints (about US$0.62) per gigabyte of data, and is being justified because many telephone calls are now conducted over the Internet and thereby circumventing a tax on telephone calls that was previously introduced by the Fidesz-party government.

The government's economy minister Mihaly Varga spoke in defense of the bill saying that because communications technology has changed the way people use telecom services the taxation also needs to change.

Hungarian Internet data traffic in 2013 amounted to more than 1.1 billion gigabytes, according to a Reuters report that referenced consultancy eNet as its source. This would equate to more than $700 million that could be raised by the Hungarian government. However, the economy ministry only estimated that the tax would raise 20 billion forints (about $80 million) suggesting that the government is prepared to impose a cap on the amount any single ISP will have to pay in order to get the principle of Internet taxation accepted.

The possibility of taxing usage was raised in the early days of Internet deployment partly because it could be used to avoid the payment of locally levied sales taxes. However, within almost all jurisdictions it was considered that the ability of the Internet to drive economic activity and therefore other tax-raising opportunities outweighed any revenues that could be raised directly. The United States federal government passed the Internet Tax Freedom Act in 1998. A variety of Internet taxes including, bit taxes, email taxes and bandwidth taxes have been considered in various locations but are specifically banned in the United States by the Internet Tax Freedom Act.

The possibility that Internet taxation could take hold amongst hard-pressed governments would have implications for such thing as machine-to-machine communications, the Internet of things and smart cities as well as for corporations and citizens.

Related links and articles:

Reuters report

IHS Internet technology research

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