Commission slams Hungary’s ‘Internet tax’

The anti-Merkel: Viktor Orbán. [EPP/Flickr]

The outgoing European Commission has delivered an unusually tough statement over a planned new tax on Internet data transfers, which has unleashed boisterous protests in Hungary.

Ryan Heath, spokesperson to Commission Vice President for Digital Agenda Neelie Kroes said the Hungary internet tax is a “terrible idea”.

Prime Minister Viktor Orbán’s government, which has been widely accused of adopting anti-democratic policies, first unveiled plans for the new tax late last week in the draft 2015 tax bill submitted to parliament.

>> Read: Hungarians protest Internet tax

Heath said in spite of attempts to put the blame on protestors for alleged violence, this was a “respectful crow, a very big crowd”, that in his words had been joined by the USA chargé d’affaires in Budapest, and that Kroes would continue to support protests against this planned tax.

“It’s not a question whether the tax is legal or not. First, if you take it in the domestic Hungary context, it’s the latest of what a lot of people would see as troubling actions. It’s part of a pattern and has to be seen as part of that pattern of actions which have limited freedom or sought to take rents without achieving a wider economic or social interest,” Heath said. He added that this was why the issue should be debated now, and not after the tax is adopted.

Kroes’ spokesperson also said it was “not OK” to try to push people through “taxes that won’t work”. The reason it won’t work he said, is that the tax is unilateral, and the Internet is global.

Asked about plans to cap the tax at the level of online providers, Heath said the method the Hungarian government was using in its attempts to introduce special taxes or laws was of announcing a very tough version, waiting for the initial reaction which is usually very negative, and then enforce a milder version.

He also said that Neelie Kroes was determined not to allow the tax to become a precedent in Hungary, because it could become a problem for Europe’s wider economic growth.

“Hungary is below the EU’s average in virtually every single digital indicator. The digital part of the economy is probably the main thing in the economy 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,” Heath said.

Neelie Kroes, who has been probably the most outspoken commissioner, will step down on 31 October. Her portfolio will largely fall in the remit of Günther Oettinger, Commissioner for Digital Economy and Society. 

Hungarian Prime Minister Viktor Orbán, leader of the Fidesz party (EPP-affiliated), has clashed repeatedly with the European Union and foreign investors over his unorthodox policies.

In the past four years, Orbán's policies have included a nationalisation of private pension funds, "crisis taxes" on big business, and a relief scheme for mortgage holders for which the banks, mostly foreign-owned, had to pay.

His policies helped Hungary emerge from recession, but some economists say Orbán may have scared off the kind of investment Hungary needs for long-term growth.

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