Internet tax

Not to be confused with the Digital Tax

2020: Malaysia internet tax

Starting January 1, 2020 Google , it will begin levying a 6% tax on its cloud and other digital services in Malaysia. The American company was one of the first to respond to the new law in the country.

As the Ministry of Finance officials explained, the purpose of the tax is to level the playing field for local businesses, as well as to receive additional revenue to the budget from enterprises that are not based in Malaysia. According to the ministry, the 6% digital rate is considered low compared to other countries, but this is enough to get more than $500 million in profit.

Google to start levying 6% tax on its cloud and other digital services in Malaysia

All G Suite users have already received the first notifications about the change. Based on the email, the service tax amount will be charged to the purchase and displayed on a separate line in the transactions under Invoices and Payments. For more information on digital services tax, please refer to the official guidance on the Royal Customer Service website.

In addition to G Suite, other paid digital services, including the purchase of video, music and applications, are also subject to taxation from the beginning of 2020. Other Google services, including Google Drive, YouTube Premium and YouTube Music, are expected to be subject to the same digital tax.

Foreign companies providing digital services are allowed to register with the customs department starting October 1, 2019. Registration for foreign service providers is mandatory if the total cost of digital services provided to Malaysian consumers exceeds $71 thousand per year.^[1]

2014: Attempted internet tax in Hungary

In October 2014, it became known that Hungary could become the world's first country with taxable Internet traffic. The Minister of Economy Mihaly Varga offers to charge money from providers for each gigabyte of transmitted information.

The corresponding bill was submitted to the Hungarian Parliament on October 21, 2014. According to Varga, the development of communication technology has changed the approach to the use of communication services, so changes are needed in the tax code. However, the introduction of a tax on the Internet may lead to an increase in the price of this service.

Risks to providers

In accordance with the bill, for each 1 gigabyte of web traffic that has passed through the provider's network, he will have to pay 150 forints ($0.62). Mihai Varga is confident that this initiative will make it possible to annually replenish the state budget by 20 billion forints (about $83 million).

The consulting company eNet estimates the amount of deductions under the new tax at 175 billion forints ($727 million) per year. This amount could have taken place in 2013, when the volume of fixed Internet traffic in the country amounted to 1.15 billion gigabytes, the volume of mobile traffic - 18 million gigabytes. The activity of Internet users is growing, which means that the revenue of the treasury (by 200 billion forints and more) from the activities of telecom operators may also increase, experts say.

Internet tax could cost Hungarian providers several hundred million dollars

According to the Hungarian Central Statistics Office, the volume of the local Internet services market amounted to 164 billion forints ($681 million) in 2013.

Protests against the internet tax

Europe's reaction to the proposed introduction of the Internet tax turned out to be negative. Neelie Kroes, Vice President for Technology of the European Commission, believes that the initiative will lead to an increase in the cost of Internet tariffs, which will adversely affect the development of Hungary's digital economy, which is already lagging behind other eurozone countries in Internet use and broadband access (broadband access ).

The country's largest telecommunications operator Magyar Telekom says that additional taxation of Internet providers will increase their total costs by about 100 billion forints ($415 million), as well as "paralyze" the development of the broadband access market.

A few hours after the Internet tax bill was introduced, about 100,000 users Facebook joined a group protesting against the initiative. Mass protests are already being prepared on the streets of Hungary.

The authorities refused to introduce a tax on the Internet

The initiative of the Hungarian authorities regarding the introduction of an Internet tax caused a wave of protests, which took place at the end of October 2014. According to various sources, from 40 to 100 thousand residents of Budapest participated in the rallies.

According to the protesters, the taxation of Internet traffic is more an attempt by the government to take control of the local segment of the World Wide Web than a good intention aimed at strengthening the state budget.^[2]

The first demonstration took place on October 26, 2014. Its participants threw old computer mice and keyboards at the headquarters of the ruling Fidesz party. The government responded to the protest with a statement to reduce the tax rate. It was assumed that individuals will have to pay 700 forints ($2.9) every month, regardless of the volume of web traffic, legal - 5000 forints ($20.6). However, the Hungarian people dissatisfied with the regime took to the streets again.

Tens of thousands of Hungarian residents take to the streets to voice their dissatisfaction with the introduction of an internet tax

After the second wave of anti-government protests, the authorities decided to cancel the introduction of a tax on the Internet. Through state radio, Hungarian Prime Minister Viktor Orban stated the following:

"Despite all the aspirations of the authorities, this tax simply cannot be introduced. We want to make decisions with the people. The government wanted to expand the telecommunications tax, and the population perceived it as an Internet tax. People question any taxes. "

The prime minister added that in its current form, the bill on taxation of the Internet cannot be adopted, but in 2015 the initiative will be revised.

According to Political Capital analyst Peter Kreko, the invented tax did not find support even among supporters of the current regime. The opposition socialist party of Hungary believes that Orban will not abandon the idea of ​ ​ taxing the Internet and will try to introduce this law under a different name and content.