Hungary will shelve Internet tax plan for now, Orbán says

Viktor Orbán [European People's Party/Flickr]

Viktor Orbán, Hungarian Prime Minister [European People's Party/Flickr]

Hungary will shelve plans to introduce a tax on internet data traffic that has generated big protests over the past week, and will revisit regulating and taxing money made online next year, Prime Minister Viktor Orbán said today (31 October).

A provision that extended a telecommunications tax to online data traffic will be withdrawn, Orbán said.

“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,” Orbán told public Radio Kossuth, after remaining silent on the controversy for more than a week.

“If the people not only dislike something, but also consider it unreasonable, then it should not be done … The tax code should be modified. This must be withdrawn, and we do not have to deal with this now.”

Orbán, who took office in 2010, has rarely shied away from conflict. Once in power, his centre-right Fidesz party rewrote large swathes of Hungarian law, nationalised private pension- fund assets and taxed big business and banks to keep the budget deficit in check.

But the internet levy provoked massive protests that showed public discontent with Orbán’s policies goes well beyond taxation. Orbán said his government would not confront such massive popular discontent.

>> Read: Hungarians protest internet tax

“Today we are at a point that the technical tax modification proposal that we launched a few days ago became a fear-inducing vision that has made it impossible to talk these things over,” Orbán said.

He added that the government would start consultations next year over internet regulation and potential ways to tax some of the revenue generated online.

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

“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.”

He said a consultation on those two issues will begin in January 2015 and will probably wrap up in the first half of next year. 

On Thursday, the outgoing European Commission has delivered an unusually tough statement over a planned internet  tax in Hungary.

>> Read: Commission slams Hungary’s ‘Internet tax’

Neelie Kroes, the outgoing Commission Vice President for Digital Agenda, stated today:

“I’m very pleased for the Hungarian people. Their voices were heard. I’m proud the European Commission played a positive role in defending European values and a digital Europe.” 

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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