Bursting the Bubble

Hungary’s Internet Tax: Continuing to undermine the country’s democratic principles

31 October 2014 | by

In the past week, Hungary’s government led by self-styled Prime Minister Viktor Orbán has been faced with one of the biggest challenges since his accession to power in 2010. Hundreds of thousands of Hungarians took to the streets on Tuesday and last weekend to protest against the recently announced tax on Internet use – a measure proposed by the Ministry of Economy, but initiated by Orbán himself. The Internet tax would see an introduction of a levy of some 150 forints (0.49 euros) for each downloaded gigabyte. While this is not the first unorthodox measure to shore up Hungary’s stagnating economy, given the size of the revolt that it has generated among Hungarians, it would appear that the Fidesz government has this time shot itself in the foot. However, there are signs that plans for the tax will be dropped, with Orbán stating on radio that he plans to launch a public debate on Internet regulation in January 2015.

In the past few years, Hungary has become an awkward member of the European Union – awkward for the rest of the EU and awkward internally, as numerous leading politicians on the political right have expressed their concerns with the alleged Brussels’ meddling with national politics. The latest of such statements comes from the President of the Hungarian Parliament, László Kövér, who compared the EU to the Soviet Union and called on Brussels to stop dictating how Hungary should run its internal affairs. Nevertheless, the EU has expressed only very limited concern over the developments in the country, and while the European Parliament passed a Resolution on 3 July 2013 in which it found Hungary in breach of Article 2 TEU, no further measures have been taken.

Budapest has been criticized for its recent constitutional changes, which have, among other things, weakened checks and balances, and undermined the independence of the judiciary and unfairly reformed the electoral system. Furthermore, the government has been accused of using tax policies to curtail media freedom. One such example is the advertising levy imposed in August 2014, just before the last parliamentary elections. This measure alone has undermined the position of the privately owned RTL television channel, which, unlike the public service media, does not toe the government’s line. The Commissioner for Digital Economy, Neelie Kroes, was very critical at the time and suggested that the measures were designed to “wipe out democratic safeguards” so that Fidesz could rule unchallenged.

Previously, the government had already imposed tax on the telecommunications sector, which is subject to a capped levy for every minute of voice connections and for every text sent. Seeing that many Hungarians have switched from more expensive conventional phone calls to calls via the Internet, the government has also come up with an idea to introduce a similar tax on Internet use. As of 2015, Internet service providers (ISPs) will pay 150 forints (0.49 euros) for every gigabyte used either by the companies themselves or their consumers. According to the EU Commission’s estimates, streaming a film would cost an extra fifteen euros, while streaming a whole television series would mean a charge of whopping 254 euros. Many in Hungary fear that Internet companies will simply pass the buck onto consumers through higher charges. As a result, hundreds of thousands of them took to the streets to express their frustration. On Sunday and Tuesday, thousands of supporters marched in Budapest and other big cities, making it the biggest rally against the Orbán government since 2010. Reuters has estimated that Tuesday saw as many as 100,000 Hungarians protest against the measure. The movement is largely organised by a Facebook group  set up by Balázs Gulyás who claims the protests to be exclusively apolitical and who has called on protesters not to visibly promote any particular political party or ideology during the marches. While the legislation remains in place (and will do so until Orbán takes the political decision to withdraw it), the protests have led to the government’s decision to adjust the proposal to the extent that a cap of 700 forints (2.3 euros) for private users and 5,000 forints (16 euros) for private sector will be incorporated into the legislation.

Insignificant as the Internet tax may seem, particularly given the amount raised – 20 billion forints (64 million euros) – it matters for a number of reasons. First of all, the measure must be seen in the context of Hungary’s slow but steady detachment from the liberal values on which the EU has been built. In fact, Viktor Orbán is not at all shy about his adulation for Russia’s Vladimir Putin and his illiberal regime. The Internet tax has become yet another government’s leverage of control of communication and freedom of expression. By the same token, opposition, relying heavily on the Internet to promote its ideas, will be further disadvantaged vis-à-vis the government, which has at its disposal a loyal public service broadcaster. Secondly, in light of the measure’s potential to lower the quality of democracy in the country, Budapest finds itself at odds, once again, with the EU. Further diminution of the already awkward relations between the EU and Hungary poses a question whether the country has distanced itself from the EU to the extent that appropriate measures, notably the use of Article 7 TEU would be necessary. Last but not least, Hungary’s slippery slope to illiberal democracy will have serious consequences for the future functioning of the Visegrad Four (V4) group. The fundamentals of the group remain strong. However, Hungary’s detachment from Europe will have ramifications both for the group internally and externally. The group can continue its close cooperation only if the four countries agree on the most fundamental issues such as the political system. Hungary’s flirtation with illiberalism could undermine the Visegrad Four’s internal integrity and, by extension, the group’s unity in Brussels. How much longer will the EU and Central European leaders ignore Hungary’s anti-democratic tendencies? Tendencies which will sooner or later turn the country from an asset into a liability both for the EU and the V4.

This text was co-published with Visegrad Insight

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