Hungarian Prime Minister Viktor Orban froze plans on Friday to impose a tax on Internet traffic, climbing down in the face of massive street protests and warnings from the European Union that the levy was a mistake, Reuters reports.

Opponents of the tax, who said it would have hurt consumers already struggling with a faltering economy, described the U-turn as a major victory.

But Orban's announcement was unlikely to end discontent among liberal Hungarians who accuse him of being an autocrat and are frustrated there is no prospect of removing him until elections in 2018. Recent anti-tax rallies have been a catalyst for broader anti-government protests.

"This tax in its current form cannot be introduced," Orban told public radio. "If the people not only dislike something but also consider it unreasonable then it should not be done."

The climb-down was unusual for the usually combative Orban, but he may have decided that he already had enough contentious issues on his plate.

Orban said that the Internet tax plan was not being scrapped altogether. He told public radio the government would start consultations next year over internet regulation and potential ways to tax some of the revenue generated online.

The tax plan was not likely to have made a significant contribution to bringing down Hungary's budget deficit, which is anyway shrinking. Orban makes many policy decisions himself, and has a track record of coming out with radical initiatives with little or no consultation, say people who know him.

“Overall, the law was visibly flawed at several points, and it seemed ill-prepared. It was not an ideological question or a matter of big money," said Tamas Lanczi, chief of Hungary's Szazadveg Political Analysis Centre.

"When any government faces an angry population the best thing it can do is change course."

The tax protests set off an outpouring of deeper unhappiness with Orban's rule among liberal-leaning sections of Hungarian society.

"We are the people! And we the people have the right to rule the country," the movement that organized the anti-tax protests, called "100.000 against the Internet tax", said in a statement on Friday.

Under the planned tax, Internet service providers would have paid 150 forints (60 US cents) per gigabyte of data traffic, though it would have also let companies offset corporate income tax against the new levy.

Protesters said they feared the telecoms and internet firms would pass the cost onto consumers. The government later said the tax would be capped at 700 forints for individuals and 5.000 for companies per month.