Hungary plans new tax on Internet traffic

Some background.

- the proposed rate is 150 HUF/GB, that's around 0.5 EUR/GB or 60 cents/GB.

- the internet speeds in Hungary are relatively high, it's quite common to get 100 Mbps for $20/mo

- the minimum wage is around 250 USD/mo, the average net wage is $650/mo

- the levy should be paid by the providers, but probably they're going to be able to deduct it from their other taxes, that means profitable companies won't pay, currently non-profitable companies will

- the tax will be capped per subscription, the cap is rumored to be around $4 for individuals and around $25 for companies -- but most households have 2-3-4 phones, cable internet, etc.

- it's very likely that this is going to wipe out the currently loss-making telcos that can then be bought by the state (nationalized) and their assets funneled to cronies (even there was a public bid for the assets nobody would start a new company as it'd be making losses in the beginning therefore they could not deduct this tax from their taxes -- so it'd result in even more losses)

Also, it's very much likely that this is a deliberate distraction from the political conflict between the USA and Hungary that has emerged last week. (Edit: it's still bad though, as a journalist put it, it's like spraying pepper in the eyes of a pitbull: it's distracting, but you might end up in a really big trouble.)

Actually this is just a smoke screen. As a native Hungarian I can tell you this. The Hungarian government is doing business with the Russians (we build a nuclear power plant funded by Russian loan) which the EU and the USA does not like. I don't like it either because Russia is blackmailing Hungary. There can be no good outcome of this situation because we either infuriate the Russians (we depend on the Russian gas) or the EU/USA. So the government came up with this tax nonsense as a distraction. As you can see they achieved their goal. Everybody is talking about the internet tax while the government is doing business with the Russians under cover. I don't like the 150 HUF/GB but I know how it works here. There will be an upper bound per month (say 4000 HUF) for the tax. The ISPs can put this tax as an expense in their books and in the end the user will see something around 1000-2000 HUF per month plus. This is how it goes here. Make no mistake I do not protect our government or the Russians. I hate both but I want you to see what really goes on here.

I'm maybe a bit more libertarian than most HN readers, which is already a bit more libertarian than most people (especially Europeans), but when I do support taxes, I'd rather they be as broad-based as possible, unless they're targeting something which has negative externalities.

Universally applied VAT is (aside from the data-collection requirements) proven to be one of the least economically distorting taxes -- creating the least deadweight loss.

This tax seems almost pathologically bad -- taxing something with largely positive externalities. Normally you try "sin taxes" which tax things reviewed as having NEGATIVE externalities (CO2, smoking, even unhealthy foods).

It's like taxing people for reading books, or for volunteering their time to useful charities, or for picking up litter on the street. Actively discouraging something which has positive returns to society as a whole when people use more of it!

This is insane.

As a local I can't decide whether this action is just to deter public discourse on the recent claims of political corruption (that involved banning the Director of National Tax Authority from entering US) or if it is for real. Either cases are really, really bad.

Holy shit ... downloading a steam game will cost more than the game. They already get VAT on the connectivity.

First - IT in Hungary dies.

Second Hungary is on the bleeding edge of mesh networks.

A 60 cents per terrabyte excise seems less unreasonable.

That might be a good situation to remember that almost all television and radio stations in Hungary are under governmental control and so it might make sense for the government to keep people away from too much Internet usage.

Let's consider the effects of a tax on internet service providers. Critically: the tax is levied in Hungary, but not in surrounding countries.

The average household net-adjusted disposable income per capita in Hungary is $15 240 [1]. At 60¢ per GB, the tax is not breaking household budgets. Neither should it be onerous for bootstrapped small businesses. Moving hosting out of Hungary would mitigate most of their tax burden (live media would be an exception).

The case becomes more interesting when we consider scaling. Few businesses today can compete with underpowered IT. The bandwidth needs of a business's IT operations can be assumed to scale with the enterprise. Speaking as a financier, this sets up an easy transaction. If your business scales, move it out of Hungary. The benefits of offshoring scale with the company.

Avoiding that incentive structure is probably why we see the corporate tax offset. But a tax deduction is only of value to profitable companies. This turns the linear scaling disadvantage into an option-like structure. If you scale AND experience losses, there is a penalty for being in Hungary. The more cyclical or volatile a company's earnings, the greater the risk of incurring the tax and thus the benefit for offshoring. If I were a European M&A banker, I'd be working out the ceiling on earnings volatility a Hungarian company would rationally tolerate given this tax. I'd then run through the stock market and private holdings records and begin working to merge those for whom this tax would be risky out of Hungary.

Start-ups are also loss-making business entities. For a bootstrapping Hungarian, the cost of relocation isn't worth a few hundred dollars in tax savings. But for a VC it may be. If I were Austria, the Czech Republic or Poland, I'd offer every Hungarian entrepreneur a deal: We will lend you money for relocation. You repay it at 1/2 the tax we estimate you would have paid in Hungary. If I were a European VC, I'd be dusting off a recruiting pitch for bright Hungarian engineers and entrepreneurs.

[1] http://www.oecdbetterlifeindex.org/countries/hungary/

The libertarian panic is amusing. There's nothing inherently wrong with taxing internet traffic, unless you believe tax itself is wrong. Virtually everything that goes into providing internet services gets taxed, so why should internet traffic itself be sacred?

Of course it is still a Very Bad Idea(TM) in terms of economic and social impact versus benefits. And of course in the context of a totally corrupt country like Hungary there is a distasteful hidden agenda behind it.

But besides being counterproductive, tax on internet traffic is just "meh". We just don't want to pay tax on our stuff.

there is an upper limit(cap) in the tax, per month, max 700 HUF (2.2 EUR) for population and max 5000 HUF (16.3 EUR) for companies. This text is hidden in the proposal. Just media is not reading it with attention.

Doesn't sound so dissimilar to the EU's Internet tax that was planned years ago (not sure if its email tax plan was part of the same thing). I don't think it would be unreasonable to assume that this plan would get some support at European level.

In the UK our last government imposed an Internet tax, but at a flat monthly rate. Fortunately, it was scrapped.

This relates to my biggest fear with net neutrality. I don't think that NN and internet taxes are directly related. I just worry that once the government gets tinkering under the hood with the internet they are going to find a few other things they'd like to change as well.

I really think EU/NATO/US should step up covert and intelligence activities to overthrow the Hungarian government. A backwards and evil regime that has taken over Hungary should not be permitted to exist in the heart of Europe.

Ok, this is a contrarian opinion, but I think this is a great idea. This is an experiment and there isn't any data around the impact of a broad tax on internet on the economy. If Hungary implements this tax, then every other country can use that data to inform their own decisions about taxing the internet. In reality, as everyone has already pointed out, this experiment will fail horribly - which is great, because eventually SOME country or state is going to want to do this and I'm glad the experiment is being run in Hungary and not the United States or the EU.

Internet traffic tax, aka brain drain guarantee.

Does anybody know how to make the server execute "git pull" once I push the code from my local machine?

I see some convoluted tutorials that involve setting up certificates and such, I wonder if there's an easier way.

I think the only thing surprising about this is that it happened sooner than later. Eventually we will see more states imposing taxes on information.

In a sense, if they gave you free education and you used that education to create new information, then they own a certain stake in it.

Just like sales tax is used to subsidise or oversee certain business, data tax will be used fund cyber policing, censorship and such. Also, it may ensure that we don't drown ourselves into pointless data. Just like businesses are forced to engage in certain activities (typically innovative) that can generate certain markup for the whole system to be sustainable.