Global Tax 50 2014: Hungarian protestors

Hungarian protestors is a new entry this year

Hungarian Prime Minister Viktor Orbán has cut a controversial figure since being re-elected with a two-thirds majority in April.

Although his party – which he was a founding member of and has led since 1992 – also performed well in May's European elections, he has disillusioned the public with a series of industry-specific taxes.

One such tax, introduced in the summer, was levied on advertising revenues generated by media organisations, affecting companies in several bands up to a maximum rate of 40% on revenues of more than about $80 million.

However, the tax was criticised as an attack on media plurality, because much of its revenue would be garnered from just one broadcaster, providing a competitive advantage to state broadcaster TV2. The tax bill on German company RTL's revenues would have amounted to about $18 million – nine times the TV station's profits from the previous year.

While the public reaction to this levy could be described as disgruntled, there were no significant popular objections, despite RTL and TV2 both going off the air for a day in protest.

When the government proposed implementing a tax on internet usage of Ft150 ($0.61) per gigabyte, however, the public was incensed.

Within a week, 10,000 people had marched against the proposed tax in Budapest.

"The move… follows a wave of alarming anti-democratic measures by Orbán that is pushing Hungary even further adrift from Europe," said the organisers of the march.

"The measure would impede equal access for cash-poor schools and universities," they added.

The reaction forced the government to add an amendment to the Bill, capping the potential charge for individuals at Ft700 per month and for companies at Ft5,000 per month.

However, the concessions were not enough to quell the demands of the protesters that the tax be scrapped and as many as 100,000 in Budapest – a city of 1.8 million – again took to the streets.

Protests were recorded in other Hungarian cities, as well as solidarity protests in Poland, Germany and the UK, and Orbán had no choice but to back down on the tax less than a week after the first protest.

There is no doubt that other countries will have been closely observing the tactic of industry-specific taxes, both for the purpose of revenue collection – the 'internet tax' was set to raise more than $115 million per year – and for targeting specific industries.

One lesson they should take from Hungary is that taking on one of the most organised demographics in the world – internet users – is likely to end in defeat.