Hungary considers reverse-charge VAT to be one of the most effective tools against cross-border VAT fraud, Minister for National Economy Mihály Varga said a conference organized by the Finance Ministry of the Czech Republic. As Hungary represents a common stance with Czech Finance Minister Andrej Babiš, the Minister was urging the speedy formulation and adoption of a joint EU tax strategy.
As the Minister pointed out, cross-border fraud has become business-like and well-organized as criminals had been exploiting the diverse regulation of various EU members states. In the opinion of the Minister, cross-border VAT fraud, which has been causing massive damage to national budgets and bolsters the black economy, can only be eliminated through taking a common stance within the EU. Quoting data from a study of the European Commission, the Minister said that in 2013 combined VAT gap totalled EUR 170bn at the budgets of member states. In Hungary, the fiscal shortfall due to VAT fraud is estimated at HUF 500-750bn (EUR 1.7bn-2.5bn) per year. More and more experts agree that the introduction of the reverse-charge mechanism could cut the number of fraud cases. Hungary has been making efforts for years to increase the number of goods and services for which the reverse-charge mechanism could be applied, but the European Commission has repeatedly turned down proposals concerning this issue.
Mihály Varga stated there is no viable reason for the refusal, as Hungarian examples show that the reverse-charge mechanism has been effective for years in the sectors worst affected by fraud, such as scrap metal and cereals trade or the construction sector. The volume of cereals transports registered at several border crossings fell by 70 percent year-on-year. In case of the construction sector, VAT revenues soared by some 30 percent. The Hungarian Government has since 2010 introduced several legal provisions and measures within the sphere of national jurisdiction which have proven effective against the black economy. The introduction of on-line cash registers, the Electronic Road Transportation Control System (EKÁER), reverse-charge VAT at the cereals and scrap metals trade, limiting the use of cash payments at enterprises, more frequent tax returns for high-risk taxpayers as well as the obligation to register food and beverage vending machines are measures that have significantly helped combat the black economy.
VAT revenues in Hungary rose by 8 percent in 2014, while in the initial eleven months of 2015 they were up by 5.4 percent year-on-year, he added.
(Ministry for National Economy)
