The Hungarian Government has recently announced that they are considering taxing the internet with a “per Gb” charge. It has caused a greater uproar with groups from all parts of society creating an unlikely alliance.
On the face of it the proposal has some merits. Taxation of any sort needs to be cheap to collect and fair in terms of who it collects from. It would seem to score well on both counts. The taxation could be collected from Internet providers and mobile phone carriers rather than from end customers and those providers are all regulated and therefore “known”. Those organisations also tend to have sophisticated billing systems which are already capable of billing for any number of additional services. This could be implemented as a tariff change as opposed to anything more. They already do have regulated mandatory charges to deal with such as line rental and the wholesale and interconnect charges with other carriers.
It is also potentially fair and progressive.
The more you use, the more you pay. Internet usage is becoming an essential product these days but the high usage services such as downloads, online gaming and streaming certainly aren’t. Use of banking sites and retail sites is generally low volume activity. There could be a threshold level of usage which was free of charge and anything above this would be “taxable”. Similarly there would be a higher rate of taxation for businesses.
I can see some other benefits too. It would be welcomed by the film and music industries as it may dissuade some piracy and they may even see some hope that they will benefit financially from the income generated. Of course it could also be seen as a big revenue generator. According to Ofcom there were 22.6m broadband residential and small business connections in the UK in. December 2013. 77% of adults have access. 57% of mobile phones are used to access the internet and there are 4.9m mobile dongles for laptops etc. There are some big numbers here and even a small level of tax will yield a big return.
So why are the Hungarians so hostile?
There is clearly a social element. The internet is seen as free of Government influence. People feel it doesn’t need assistance and anything which threatens that independence should be fought. This is fascinating and dangerous. The vast majority of people, whether networked or not, are good and mean well but they are shielding the tiny minority who take advantage. I could make a greater case for the independence of water and electricity than the internet. The internet is only the vehicle for delivery of information but the information itself is the precious asset. I will defend freedom of speech till my dying breath but I would argue about many ways in which that speech was delivered. For example I would defend people’s right to march but that wouldn’t give them carte blanche access to march wherever and whenever they want.
There is also a value judgement involved here. Government seldom fairs well when they step into this area. What is inherent in the tax is that these high usage activities are luxury or wrong. While streaming may be pornography, in some countries they may also be lessons being streamed to classrooms. Gaming may be overly time-consuming and even harmful but the profile of usage may look like valuable flight simulation time for pilots or remote investigations being carried out by surgeons. Downloads of music and film may be piracy but also legitimate purchase through commercial sites whose prices will rise accordingly.
There is also the Freakonomics effect. This is the study of microeconomics and the behaviours of individuals. Governments often focus at the macroeconomic level. They think that if they tax a numerous product or activity there will be a financial gain albeit with a small amount of avoidance. Individuals in the street and entrepreneurs work on a different level. I can’t speak for Hungary but imagine some of the possible consequences of implementing such a policy in Britain. For example, a tax on Internet usage could drive legitimate music and video purchases to piracy. The tax gain from the new levy could be offset by reduced corporation tax from the companies behind the content and the distribution. It could also reduce the number of Internet users which could create a vulnerability amongst low income groups who feel they can’t afford it and reduce the tax take from carriers. This could also reduce the prices that phone companies are willing to pay for Government-awarded licences such as the inevitable 5G mobile network auction. In an extreme case it could encourage American-owned satellites, Irish and French carriers to innovate to provide cross border services into willing British subscriber.
The Hungarian Government has now withdrawn the proposal due to the outcry. It is a lesson that electorates often just want the status quo to be protected. Boring for politicians with ideas; but true.