Chanting "Free Hungary, Free Internet!" the crowd yesterday marched on the headquarters of prime minister Viktor Orban's right-wing Fidesz party, leaving used computer keyboards at the gates in protest.
The atmosphere grew tense as riot police surrounded the building where several windows were broken by some protesters hurling missiles, AFP correspondents at the scene reported.
Earlier thousands of demonstrators had held smartphone torches aloft outside the economy ministry in an echo of recent pro-democracy protests in Hong Kong.
"There will be no internet tax...we will block it," organizer Balazs Gulyas told the crowd to cheers.
"If the tax is not scrapped within 48 hours, we will be back again," he said.
Announcing the levy on Tuesday, economy minister Mihaly Varga said the tax — 150 forints (0.50 euros, USD 0.61) on each transferred gigabyte of data — was needed to help shore up the 2015 budget of one of the European Union's most indebted nations.
Orban has been accused of leaning toward authoritarianism, and organizers told AFP they believed the tax was aimed at restricting government critics who mainly use online media.
Others are concerned it will hurt small businesses and make it harder for people, particularly in poor areas, to access information and educational material.
"This is a backward idea, when most countries are making it easier for people to access the internet," one protester, Judit Nagy-Korsa, 55, told AFP.
The tax has also triggered alarm in Brussels. Neelie Kroes, the EU's digital chief, tweeted that it was "a shame for users and a shame for the Hungarian government".
Orban's Fidesz party later proposed capping the monthly payment at 700 forints (2.3 euros, USD 3) for consumers and 5,000 forints for businesses, but the move has failed to calm dissent.
"Orban, get lost!" chanted the protesters as they marched down the main boulevard of the Hungarian capital after the rally.
The powerful Orban, 51, reelected with a second two-thirds majority in April, has faced unusual pressure recently after the United States issued entry bans against several government officials over suspected corruption.
The top US diplomat in Budapest warned Friday that "negative trends" such as a weakening of the rule of law and intimidation of civil society had "rapidly taken hold" in Hungary.
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