- 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.)
The reason policies like this are viable politically is because public policy economists are far more comfortable estimating the direct effects of a tax than they are estimating some of the murkier, but nonetheless inevitable implications. 1st year microeconomics students learn to draw the supply and demand curves, draw in the price after tax and calculate lost consumer surplus and profits. It's core economics material.
I pay about $40 for 50Mb/15Mb and there is barely anything I can do to max this out.
What do you think would have more effect on the world: Increasing processing power 100-fold, or increasing desktop usage by 1% of the entire world population? How about 10-fold and 5%? I can guarantee you it's the former.
It's more true in case of Hungary where the minimum wage is around 250 EUR and people have a relatively luxury broadband speed, need (and addict) for car and historically good in pirating content since the world invented the VCR.
As a person who helped build a "district ISP network" back in the early 2000s, I can tell you that that reason is just some Vice.com style linkbait.
Romania has great Internet speeds because the authorities tolerated us installing cables all over the darn place. Back then it wasn't uncommon to have almost half a dozen ISPs in a one square mile neighbourhood, all offering 50-100 mbps in the city and 1-2 mbps actual Internet speeds, without any FUP.
We were almost the same age and people didn't care about the low international speeds because we could all share movies and music at 50+ mbps (and 0.5 mbps was more than enough for browsing).
This was happening way before the video chat industry took off. Also, for that kind of stuff you need good sustained upload, but the ISPs are still limiting the upload speed to around 30 mbps even for gigabit connections. This doesn't affect BitTorrent (which can be left open over night).
Could be, it's just "believing" that the article isn't a whole lie.
tl;dr Romanians love movies, we needed a way to download them and fiber was the answer. Much cheaper than copper, no risk of the cables getting stolen.
Most EU money are invested into country's infrastructure, there were lots of debates whether it is wise, as infrastructure by itself does not boost production. I can just assume that Romania and many other East Europe countries did the same.. It is not cheap at all to fiber up whole conutry, but when you have "free" money to spend, it suddenly becomes an attractive laundering option.
In my opinion, saying that country X has fast internet because users desire is a wild guess and only. I am sure Americans love watching video and skype'ing too.
If you want to connect a home, then the expensive part is laying the cables. If you've put in copper already, then putting in fiber is expensive; but if you're putting in a cable now (or recently) then putting fiber instead of (or in addition to) copper is cheap.
4G coverage is not across the country, although not too bad, but its only one provider. Look at 4G coverage in Sweden.
EU money was used to fund RAIN and RAIN2 projects - connect the main cities and then rent out the lines to ISPs.
The (Swedish) monopolist ISP had reasonably smart CEO who realised that laying last mile in fiber costs same as laying it copper, but you'll lock-in your users for decades, no competition will ever be able to compete with that.
And the main reason of cheap fiber installation was fact that majority of people live in blocked houses, so population density is really high. Now look at households in US - massive houses, separated by massive land. One US house is probably equal to 20-30 Lithuanian families.
Strange theory. Have you considered they just need the extra money? Also, it wouldn't be a huge distraction anyway (from whatever) - I'm pretty sure they could invent more revolting taxes if they wanted to.
-the minimum wage in hungary is actually 328 EUR (~430 USD) / month in 2014
-the average wage in hungary for full-time employed people was actually ~975USD / month in the first half of 2014.
Sorry, but lest this is marked as "informative" by anyone due to it coming from a native Hungarian, I'd like to say (as a neighborhood) that this "it's a distraction" sounds like the usual ideas of how goverment works put forward by some blogs, columnists, that are not really grounded in reality.
It's not like Hungary only does "business with the Russians" for the very short term that this will be in the news, for it being a "distraction" to be effective.
It's also not like there would be any popular backslash on "doing business with the Russians" at this particular time either, so that they would need a distraction.
It's more likely that they just wanted an extra tax and some extra dough coming their way, and came up with this, sans distraction nonsense.
Edit: well, that seems comprehensively debunked
I mean, you get free press (Metropol, elsewhere known as Metro, which IIRC is swedish) at metro stations, it would make more sense to tax _that_ if you really wanted to clamp independent media.
Also, many people with a smartphone aged 25+ have a company-payed one, so the tax is irrelevant to them. (source: anecdotal evidence as someone living in hungary)
What if the tax is just a trojan horse? If it's introduced, the government will have to install "smart meters" somewhere, checking who consumed what in order to reconcile it with the amount of paid tax. The move from "smart meters" to "total eavesdropping capability" is then just a firmware update away.
If you really think the political news/anything ratio is higher in the average megabyte of internet download than in Metro I am afraid you live in a very unusual bubble.
Purchase a modern AAA game on steam, they're around 30G. Instant 15e additional tax when downloading it. And that tax gets paid every time you redownload anything.
Also netflix becomes a lot more expensive. 50 cents per hour for standard definition or 1.5 euros per hour in HD.
The move itself, even with an upper cap of 3-10EURs would be devastating and pointing to the wrong direction. Hungary's only option to rise would be education and the strengthtening of the IT sector. But that would need at least 10 years of investment and we're still only talking about it. BTW, there was a news bite I think on the same day that this utter stupid move was announced, that we should make the IT education stronger, we should teach more IT in elementary school, blah-blah. Sounds like something that should have been (and indeed have been) said in like 2000. Yet nothing happened, apart from cutting back IT classes last year.
This is yet another step in the wrong direction. Totally wrong direction.
Oh, and the context: the national tax authority has been known and proven to support criminals who stole around 30M EUR of VAT/yr. It's been in the news, nothing happened. Then the idiots tried to force a US company to pay them (high ranking officials of the tax authority) to launch attacks on the competition of the said US company. That's when they notified the US authorities and that's how prominent Hungarian politicians (and/or their immediate comrades) were banned from the US. And this is what this smoke screen is intended to cover. Hopefully it will add up in the heads of people.
From what I read (even from your own comment), it's the other way around.
The US doesn't want Hungary to do business with Russia and it even threatens the Hungarian government. For example, the US administration banned Hungarian govt officials from entering the US a few days ago.
But I have yet to read about a single threat the Russians made towards the Hungarians, if they do not stop doing business with the US.
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!
Now I guess the next question is, are the pipes in Hungary publicly owned.
This is the risk of being a business in transport. If a cheaper, faster and more accessible form of transport comes along you go out of business. Not because something has killed you or your business (you are perfectly allowed to still do your business as you like), but because you aren't useful anymore.
For example the milkman disappeared with the invention of refrigerated transport. Not because the milkman was killed, but because he was no longer useful.
Please, do not defend things that are not useful.
s/refrigerated transport/internet file transfer/
Amazon (books etc), Google and Facebook (advertising), Apple (music and movies), and many other Internet companies take jobs from Hungarian voters. And as far as I remember these companies don't pay much tax.
They probably add some jobs, but if you worked in the bookstore, the advertising agency or the record store, and your job was lost to the Internet, you would be the one feeling the externalities of the Internet.
The internet and globalization as a whole open possibilities for less developed countries. At the same time, they are often exposing their markets to competition they simply cannot compete with at this point.
The common argument is, that these countries should open up, catch up in education and participate in the next wave of innovation (e.g. skip the web, go directly to mobile) or learn from the faults of the first movers (e.g. European cc-payments requiring pin).
But when we look at the country arguably profiting the most from globalization, China, we find that it is massively protecting its market by requiring joint ventures with local companies and blocking internet-based companies, which could circumvent these measurements.
These points do not mean, that taxing internet traffic is the right thing to do, it just means, that not all regulations are bad. You have to look carefully at each industry. In Germany taxis are strongly regulated. Drivers get special trainings, the cars have to be checked more often than regular cars, a taxi has to accept every passenger and so on. I support them fighting Uber, which ignores these regulations and is trying to build a monopoly by competing on price. And monopolies are bad for workers and in the end customers, even if Peter Thiel wants to sell a book.
Edit: His parent comment is now dead, but you can get the context out of nightcrackers answer.
The Internet, while most of us don't care, has negative externalities
- killing hundreds of thousands of businesses such as bookstores, movie
rental stores, record stores;
- makes it possible through IP telephony,
email, the web, collaboration tools etc. to outsource millions of jobs;
- is a time consumer like no other before;
Also, about wasting time on the internet, maybe for you socializing or gaming is a waste of time, but before internet people also did this, additions already existed back then you know.
Yes, the Internet creates businesses as well but I don't think I've ever
used a Hungarian Internet business. Also, the outsourced jobs go mainly
to Asia. I could see why a conservative government would tax the Internet.
I don't think Hungary will return to pre-industrial times because of an Internet tax.
It will not return but they'll be stuck there. This will have a chilling effect on the economy, and about all new jobs enabled by the internet? no new job will be created, they'll go to other countries without imposed tax barriers.
Income taxes, capital gains taxes, corporate profit taxes etc. are much more important, even to most Internet companies, than the proposed Internet tax because they are much bigger.
There are a couple of successful ones though - Ustream is quite widely used, so is LogMeIn or LiveJasmin (webcam porn).
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.
First - IT in Hungary dies.
Second Hungary is on the bleeding edge of mesh networks.
A 60 cents per terrabyte excise seems less unreasonable.
The average household net-adjusted disposable income per capita in Hungary is $15 240 . 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.
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.
After the outrage now there're rumors about these caps, but they were not part of the proposal.
"This text is hidden in the proposal. Just media is not reading it with attention."
Both statements are untrue.
Isn't this why we have proposals?
In the UK our last government imposed an Internet tax, but at a flat monthly rate. Fortunately, it was scrapped.
I'm being somewhat facetious here, as current Hungary is far from the point where direct action against govt could or should be considered.
I'm just stressing the point that punishing the populace for the sins of the leaders is also uncool ceteris paribus.
PS: I'm Hungarian.
Honestly, I have no idea how the EU should deal with Hungary (or, if we generalise the problem, any member state getting an authoritarian government). I’m deeply, deeply uncomfortable with anything involving actual violence. That’s the Europe of that past and that Europe was a horrific place I never ever want to return to. The EU should be able to solve internal conflicts politically. That’s the issue here. And the EU can’t (and shouldn’t) force radical change inside countries – but it should be a vigilant watchdog for human rights. I’m just not sure exactly how to implement that in practice – but I’m certain I don’t want violence.
Yes, they are a bunch of corrupt evil baby eating monsters, but they are also who the people keep voting.
I am not sure "let's remove democratically elected governments we disagree with" is the direction where we want EU/NATO/US to go.
I see some convoluted tutorials that involve setting up certificates and such, I wonder if there's an easier way.
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.
What?! Does that mean the local water company owns a stake as well? I mean, I couldn't have possibly survived to receive that education without a source of clean water, right?
And what about the people who didn't receive a state-supported education (ie, private schools and home schooling). Are they exempt from this tax of yours?
Alternatively, whenever you buy storage media (DVD-R, HDD) there is a surcharge that goes to authors. That's all done on the premise that this media will be used for piracy.
You already pay tax on information when you watch Netflix or licence a patent.
Also I did not say give it all to government.
I did not say this is fair for anyone.
You're not using your education to generate data. Most of the data is made by other people's education and then multiplied many times. Even for cases where you do create information, like in your comment, many magnitudes more data was sent over your line to get it before my eyes. If they wanted to tax new information, they wouldn't do it through a flat fee per GB.
Sales tax is a tax on a monetary exchange. You tax the price you pay for your shoes, you don't tax "$3 per shoe". The point of that is taxing value rather than quantity. How you use the tax money it is irrelevant to how you acquire it.
And last but not least: we're already drowning in 'pointless data'. A lot of the internet's capacity is used to transfer scripts and styles rather than real information. Whether you consider that pointless is a different matter, but it's not up to the government to say what you should consider pointless data and what you shouldn't.