Hungarian government confirms telecom tax reforms in MoU with Magyar Telekom

An otherwise uncontroversial recent MoU from Hungary on government and private sector telecoms cooperation nevertheless contained some significant points about taxation policy.

Late last week came the announcement that the government of Hungary and leading operator Magyar Telekom had signed a memorandum of understanding confirming their long-term cooperation « for the digital transformation of Hungary ».

In the memorandum Magyar Telekom said it confirmed its intention to promote the development of long-term sustainable fixed and mobile infrastructure as well as the rollout of services, contributing to the EU’s Digital Decade programme and the achievement of the 2030 objectives, in line with the country’s National Digitalisation Strategy.

Magyar Telekom says it now offers gigabit speed to more than 3.5 million homes and businesses and increased its outdoor population-based 5G coverage to 60% as part of its mobile network modernisation programme. Continuing these developments, Magyar Telekom is committed to build a gigabit-capable fixed network covering an additional one million households in four years, making a fixed gigabit-capable network infrastructure available to 4.5 million Hungarian homes and businesses by the end of 2027. 

The company says it will also accelerate the rollout of 5G coverage, resulting in an increase to close to 99% population-based outdoor 5G coverage by 2026. 

However, importantly, the government of Hungary confirmed in the MoU its intention to abolish the utility tax payment obligation of electronic telecommunication providers from January 2024, and the supplementary telecommunication tax from January 2025.

This joint statement underlines the point made in our April feature that the Hungarian government is “increasingly displaying its determination to boost the state’s role in the telecoms sector”.

However, it is interesting that, for now at least, the government seems to be avoiding the route popular with many governments of taxing a sector perceived as highly profitable. And it’s not alone. Back in July President Bola Ahmed Tinubu of Nigeria ordered the suspension of the 5% excise tax on telecommunications services in the country.

It’s unlikely that this is a trend; spectrum pricing and telecoms taxation are often seen as easy revenue wins by governments. However, the policy directions of Hungary and Nigeria hint at an acknowledgment from some quarters that the imposition of too many telecoms taxes can penalise end users and businesses as well as boosting the exchequer.