Taxation requires an innovative approach also when it comes to challenges of digitalization, therefore cooperation and data exchange between the tax authorities of member states must be bolstered, Minister for National Economy Mihály Varga said at a recent ECOFIN session in Sofia, Bulgaria.

The Government of Hungary, however, only supports measures which do not place any additional administrative burdens on taxpayers, he noted.

The VAT gap, i.e. the budgetary shortfall from unpaid VAT, is estimated at more than EUR 150bn per year within the EU. Currently, tax evaders and fraudsters are exploiting the fact that national borders act as barriers for the tax authorities of member states in tax collection and control. This must be changed, the Minister stated. To this end, the extension of the so-called “one-stop-shop” system may be a solution. This scheme enables, for example, the National Tax and Customs Administration of Hungary to collect tax from a company registered in Hungary even if these receipts belong to the budget of Austria, Germany or any other EU member state. Tax fraudsters namely exploit national borders and fail to pay taxes in any member state. Through the scheme, however, the Hungarian tax authority could transfer the amount it has collected to the relevant member state.

As the Minister noted, the operation of the scheme requires jointly executed, prompt controls which can only be effective if tax authorities have access to a wide range of data which they can share with each other. When it comes to cooperation between the tax authorities, he added, those measures must be prioritized which do not place any additional administrative burdens on taxpayers.

At the meeting of finance ministers, the issue of how to levy fair taxes on digital enterprises was also discussed. Concerning this topic, Mihály Varga said the problem could not be resolved solely by the EU. The effective and fair taxation of digital enterprises is only possible globally, through cooperation with major trade partners, especially the United States, he pointed out.

The Minister has called for a temporary scheme, saying that at the moment digital enterprise giants were not only harming the principle of fair taxation but they were also depriving the budgets of member states of millions of euros each year.

(Ministry for National Economy)