As the latest tax gap report by the European Commission points out, Hungary’s measures against tax fraud and avoidance have been successful: the VAT gap fell by more than 4 percentage points in one year.

The report estimates the Hungary’s VAT gap fell from 22.24 percent in 2013 to 17.95 percent in 2014 – thanks to potent anti-fraud measures by the Government. With this figure, Hungary achieved the third best result in the EU.

The largest contributors to this improvement of more than 4 percentage points were indisputably on-line cash registers, although they became mandatory only in the final four months of 2014 (as of 1 September). In the Ministry’s prediction, data from the year 2015 will be even better, as the Electronic Public Road Trade Control System (EKÁER) was introduced and that was the first year concerning which enterprises were obliged to use only cash registers connected on-line to the tax authority. In 2014, on-line cash registers generated tax revenues of HUF 150-200bn.

The tax authorities of several EU member states have requested information from the Hungarian Tax and Customs Administration (NAV) on regulations of on-line cash registers and EKÁER, planning to introduce similar solutions.

Besides these measures, there are several other resolutions aiming to combat the black economy, such as the on-line registration of vending machines, summary VAT declaration forms, company tax registration (aimed at filtering out serial tax evaders), reverse-charge VAT in the metals and grains trade as well as at temporary work agencies; limiting the use of cash by enterprises; more frequent submission of VAT forms by certain high-risk enterprises.

Each year, Brussels estimates the difference between expected VAT revenues and VAT actually collected, the so-called tax gap, in every member state. This provides an estimate of revenue loss due to tax fraud, tax evasion and tax avoidance, but also due to bankruptcies, financial insolvencies or miscalculations.

(Ministry for National Economy)