Brussels may not restrict Internet access in the 21th century through blocking the use of a preferential VAT rate, Minister for National Economy Mihály Varga said, following an ECOFIN meeting in Brussels. The Government wants Internet access for more and more people at reasonable prices, therefore it will do all it can to make sure that besides Hungary any member state, which considers digitalization to be important, is capable of applying a preferential VAT rate.

The EU’s Finance Ministers discussed the European Commission’s proposal concerning the reduction of VAT on e-publications. The current directive does not permit the use of a reduced VAT rate for on-line services, such as the electronic sale of publications, although such a rate is allowed for physical publications.

The Commission’s proposal is “part of the EU's wider effort to modernise value added tax for the digital economy in the context of the EU's digital single market strategy”.

As Mihály Varga said, Hungary was prepared to support the proposal provided it included a reduced VAT rate also for Internet access, as this would well complement efforts to develop digitalization EU-wide.

Hungary’s intentions were reported to Commissioner Pierre Moscovici in 2016, the Minister added. At the session of the working group that discussed taxation issues, Hungary’s proposals and reasons for reducing the rate of VAT on Internet access have been presented in detail, Mihály Varga pointed out.

The Ministers also debated the issue of reverse-charge VAT. The Commission’s current proposal would permit member states to request until 30 June 2022 the use of reverse-charge VAT on transactions with a value above EUR 10 000 each, provided certain conditions are met. Hungary believes that the proposal is a useful and adequate tool in the fight against tax fraud, but regulations must take Hungary’s interests also into account, he stressed.

At the ECOFIN meeting, the Country Reports for 2017 were also presented. The study on Hungary acknowledges achievements concerning economic growth, debt reduction, job creation and employment indicators. Authors of the report also underline that besides steady and increasingly balanced economic growth, external and internal balance positions have also improved, the level of state debt has declined and exposure to external risks has diminished. The study also evaluates the business environment and the vocational education system. Unlike in prior years, the Commission have not made an in-depth analysis, as they had not identified any macro-economic imbalances, the minister noted.

(Ministry for National Economy)