Rallying Against the World's First Internet Tax

Thousands of Hungarian protesters held up their mobile phones and hurled old computer equipment in opposition to Prime Minister Viktor Orban's plans.

People holds up their mobile phones as they protest against new tax on Internet data transfers in center of Budapest. (Laszlo Balogh/Reuters)

Tens of thousands of Hungarians gathered in central Budapest Sunday to protest a proposed tax on Internet use, accusing prime minister Viktor Orban of attempting to restrict freedom of information in the central European country. The demonstrations marked an unusual public rebuke of Orban, whose Fidesz party consolidated its dominance of Hungarian politics with a series of electoral victories this year.

The tax, included in Fidesz's 2015 budget proposal, would charge telecom companies 150 forints (about 61 cents) per gigabyte of data. One estimate placed potential revenue from the tax at 100 billion forints ($414 million), an amount that would help Hungary lower its budget deficit to within the European Union standard of 3 percent of GDP. Budapest already levies a 2-forint tax on telephone calls and text messages, creating 42 billion forints of revenue during the first nine months of 2014.

Accompanying this measure is Orban's unsettling enthusiasm for authoritarian politics. In July, the prime minister told a group of ethnic Hungarians in Romania that he wished to create an "illiberal state" along the lines of Singapore, Russia, and China. The European Union wasn't amused, but Brussels has shown little inclination to challenge Orban.

"The EU has been critical of Orban for introducing illiberal policies, but they've not used all available tools to sanction him," said Tsveta Petrova, a Europe analyst at Eurasia Group, a political risk consultancy. "They've allowed Fidesz to claim it is defending Hungarians against the interests of European bureaucrats."

Fidesz has also benefited from a weak, fragmented political opposition whose inability to weather the global economic slowdown—Hungary's GDP fell nearly 7 percent in 2008—contributed to its fall from power. But the protesters' reaction to the Internet tax has indicated that Orban's brand of economic populism may have gone too far.

"The Internet is very important to a lot of people, especially the young," said Petrova. "The government perhaps underestimated the impact of the tax."

Since assuming power in 2010, Fidesz has dominated Hungarian politics. Elections in April earned the party a two-thirds majority in parliament, giving Fidesz a wide mandate to alter Hungary's constitution. Subsequent votes for the European parliament in June and for the country's municipalities in October brought similar results.

Fidesz has placed economic nationalism at the center of its governing platform. In June, Parliament imposed a progressive new tax on advertising revenue that targeted RTL Klub, a popular independent television network owned by Bertelsmann, a German conglomerate. The Internet tax, too, has a foreign company in its crosshairs: Magyar Telekom, Hungary's largest telecom provider, is a subsidiary of Deutsche Telekom. Unsurprisingly, the company has also spoken out in opposition.