Magyar Telekom faces tax hike under Hungarian web duty plan

Magyar Telekom faces a tax bill of HUF10 billion (€32.6 million/$41.4 million) if the Hungarian government fails to cap the liability of communications service providers (CSPs) to pay a proposed new Internet service tax.

Equilor Securities analysts estimated the Deutsche Telekom subsidiary could be hard hit by the government's plans to tax Internet and telecoms service providers based on the web traffic they handle. The analysts told Reuters that previous tax breaks employed by Deutsche Telekom would not apply to the new fee, meaning the operator would pay considerably more than the HUF200 million-300 million it currently pays in tax in Hungary.

Proposals drafted as part of the Hungarian government's 2015 tax bill--which was submitted to parliament late Tuesday--would see CSPs charged HUF150 per GB of data traffic.

Economy minister Mihaly Varga said the duty would form part of an existing telecoms tax and is being proposed because the bulk of calls and messaging take place via the Internet rather than traditional phone lines, reported.

Hopes that the fees will be capped were raised when the government predicted the tax could raise HUF20 billion per annum. Observers note Hungary's web traffic hit 1 billion GB in 2013, which is high enough to generate up to HUF175 billion, Reuters reported.

For Magyar Telekom, the planned tax has cast doubt on whether it will resume dividend payments in 2015, the news agency noted. The operator recently put the 2014 payment on ice in a bid to control debt.

What is clear is that the Hungarian operator's CCO, Attila Keszég, won't be around to oversee the change. The company announced on Monday that Keszég is stepping down on December 31 to take up a role within Deutsche Telekom's European headquarters.

Christopher Mattheisen, Magyar Telekom's CEO, said the appointment highlights the "significance of the Hungarian company within Deutsche Telekom Group," and a sign of "how strong Hungary's innovative progress…is."

For more:
- read this Reuters report
- view the article
- see Magyar Telekom's CCO announcement
- read the operator's dividend statement

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