Discontented Hungarians triumph over government as internet tax put on hold

A quarter-of-a-century ago, Viktor Orban was a firebrand student leader whose stirring speeches roused Hungarians to demand an end to communist rule, the introduction of liberal democracy and the departure of Soviet troops.

Now he is licking his wounds after being on the losing side of another protest movement, which brought tens of thousands of people on to the streets of Budapest and dealt a rare defeat to his increasingly autocratic government.

Now in his second consecutive term in office, Orban has become famous – and infamous for some – for the “unorthodox” reforms he has introduced to try and balance Hungary’s budget and kick-start its economy.

But Orban's latest brainwave enraged many of his compatriots, uniting critics from across the political spectrum in mass rallies organised through Facebook.

Having already imposed special levies on the banking, retail, energy and telecommunications sectors to chip away at Hungary’s budget deficit, Orban’s government became the world’s first to propose taxing online data traffic.

As an extension of an existing levy on phone calls and text messages which has netted the government more than €135 million this year, plans were unveiled to charge 150 forints (49 euro cents) for every gigabyte of data transferred.

The reaction was immediate, furious and – fittingly – co-ordinated online.

Within hours of the announcement, thousands of people had signed up to the protest Facebook page, and were planning a march through Budapest to vent their disgust.

“In more developed nations, broadband internet access is considered part of human rights,” said Balazs Nemes, one of the founders of the protest group.

“Only the darkest dictatorships want to control the internet either financially or with raw power,” he railed.

“We pay VAT, the internet service providers pay corporate taxes, so what justifies making web use a luxury when we do basic things like arranging medical appointments, university applications or banking online?”

If that seems overwrought for talk about a tax issue, it is because the government’s plan touched a nerve for many Hungarians, particularly in Budapest.

They accuse Orban of dangerously undermining their country’s democracy since he took power in 2010, by introducing a new, deeply conservative constitution, concentrating huge power in the hands of his ruling Fidesz party, and stifling dissent in media, politics and civil society.

The issues mingled at a rally on October 26th that brought tens of thousands of people on to the streets of Budapest, six of whom were arrested for hurling old computer keyboards and consoles at Fidesz headquarters.

With Hungary’s main opposition parties in disarray, the far right on the rise, and Fidesz bullish after crushing recent victories in general, European and local elections, civic groups used the internet tax issue to channel discontent.

“Those who use the internet see more of the world, that’s why the government doesn’t want a free internet,” protest organiser Balazs Gulyas told the crowd. “We’re not going to pay an internet tax to a corrupt tax authority.”

Hungary’s business community was also alarmed, particularly foreign-owned firms that feel targeted by special taxes already imposed by Orban.

"The plan is incomprehensible," said Christopher Mattheisen, chief executive officer of Magyar Telekom, Hungary's biggest telecoms provider. "Service providers will have to start thinking how they can limit their current services."

The European Union was also quick to lambast Orban's plan, as it has many of his other reforms – criticism that he bats away as the ill-willed meddling of foreign bureaucrats and bankers.

"It's not okay to try to push people off the internet through taxes that won't work," said Ryan Heath, spokesman for outgoing EU digital commissioner Neelie Kroes.

“It’s part of a pattern … of actions which have limited freedoms or sought to take rents without achieving a wider economic or social interest,” said Heath.

"If Hungary becomes a precedent in this instance, it can become a problem in a lot of other member states and become a problem for Europe's wider economic growth," he added.

"The digital part of the economy is probably the main thing keeping Europe out of recession right now…So taxing that in a country that is already below the average on digital indicators is a particularly bad idea."

Kroes even backed the street protest on Twitter, writing: “I urge you to join or support people outraged at #Hungary internet tax plan who will protest 18h today #Budapest”.

Orban’s government is used to getting its way, but the deluge of criticism prompted it to amend the internet tax bill, with pledges to cap the cost to individuals and to ensure that service providers did not pass on costs to customers.

Opponents were unmoved, however, and about 100,000 people again marched against the proposals two nights after the first protest.

“The internet tax is a symbol of the government’s authoritarianism,” web entrepreneur Zsolt Varadi told the crowd. “We not only need to defeat the internet tax, we need to believe that we are capable of criticising and influencing the state.”

Last Friday, Orban broke his silence on the issue.

“This tax in its current form cannot be introduced, because the government wanted to extend a telecommunications tax, but the people see an internet tax,” he said.

“If the people not only dislike something, but also consider it unreasonable, then it should not be done…We want to govern with the people.”

Orban said what was intended to be a “technical tax modification” had become “a fear-inducing vision that has made it impossible to talk these things over.”

He made clear, however, that he intended to come back to the issue.

“The tax code should be modified… [but] we do not have to deal with this now,” he said, announcing that “national consultations” on the matter would start next year.

“There are two questions: the question of internet regulation, what can and cannot be done, and the financial questions of the internet,” Orban said.

“We really should see somehow where the huge profits generated online go, and whether there is a way to keep some of it in Hungary and channel it into the budget.”

Orban occasionally loses battles, but few wars, and he will search hard for a way to win this one. Hungary’s cash-strapped neighbours may even follow his lead, as they have with other controversial fund-raising reforms.

But for now, opponents of the “Viktator” are happy to have slowed the creation of what they call “Orbanistan”.

On her last day as EU digital commissioner, Kroes also celebrated.

“I’m very pleased for Hungarians today,” she wrote on Twitter.

“Their voices have been heard.”