“Parliament has voted to adopt the bill on next year’s tax changes, which will further improve the country’s competitiveness and that of its enterprises, and which will contribute to the further protection of the Hungarian economy and to improving competitiveness”, the Ministry of Finance’s State Secretary for Tax Affairs Norbert Izer said in a statement to Hungarian news agency MTI on Tuesday.

Mr. Izer told the press that in addition to possibly generating several tens of billions of forints in additional revenue for the budget each year, the proliferation of online invoicing will also reduce the administrative burdens on enterprises in view of the fact that the tax office will be preparing their VAT tax returns instead of them from the spring of 2021.

“Parliament has voted to adopt the proposal that could also contribute to increasing Hungary’s economy growth via the purification of the market and reducing the burdens on enterprises”, Mr. Izer highlighted. “In 2018, the rate of growth of the Hungarian economy reached 5.1 percent, 5.2 percent in the second quarter of this year and 5 percent in the third quarter. The newly adopted piece of legislation could serve as an engine of economic growth and as another important element in the protection of the Hungarian economy”, he underlined.

“The online invoicing system has already proven itself. The system’s effectiveness has also been acknowledged by the European Commission in its Tax Gap report published in September of this year, according to which the greatest reduction in tax avoidance was achieved from 2017 to 2018 when, according to the estimates of the Commission’s experts, the rate of tax avoidance fell from 13.9 percent to just over 9 percent. The rate of tax avoidance of under 10 percent is not only exemplary because it is well below the EU average, but also because this major clean-up among private sector business was achieved in such a short time”, he explained.

“We have arrived at the threshold of a new era in the whitening of the economy and tax simplification”, the State Secretary declared. “The tax office has also been making private individuals exempt from having to fill out personal income tax returns for the past three years now. As a result of the bill adopted today, this kind of tax office service could also become available to hundreds of thousands of enterprises in view of the fact that, as a result of the extension of the online invoicing system, it could become possible for the authority to prepare the VAT returns of Hungarian enterprises from as early as the spring of 2021”, he continued.

“Within the online invoicing system, enterprises currently send electronic invoices to the tax authority with relation to transactions with domestic VAT subjects, the VAT content of which reaches one hundred thousand forints. This limit will disappear from next year, meaning that in theory the tax office will receive data with relation to all invoices. From the first of July, the tax office will receive all invoices made out with relation to transactions between enterprises, and from January 2021 the data on all invoices made out to private individuals will also have to be sent in to the tax authority”, the State Secretary detailed. “The change is hugely significant, because as a result the opportunity for tax evasion will drop to a minimum with relation to all participants of the economy, which should also generate major revenues for the treasury”, he added.

“According to estimates by market analysts, the online invoicing system has generated 200-250 billion forints (EUR 600-750 million) in additional revenue over a period of one year”, Mr. Izer told the press.

“The new system could mean tens of billions in additional revenues for the state treasury, but the direct profits realised by the honest participants of the entrepreneurial sector should also not be ignored in view of the fact that the extended online invoicing system also serves to curb the activities of fraudulent taxpayers”, the State Secretary explained.

Mr. Izer pointed out that tax cuts will also be continuing next year. “In 2020, practically everyone will be affected by the tax cuts, and the government will be making mothers with four or more children exempt from having to pay personal income tax for life. Small and medium-sized enterprises will also be enjoying ta cuts next year in view of the fact that the rate of small business tax (KIVA) will be reduced from 13 percent to 12 percent, and the rate of VAT on accommodation services will be a full 9 percentage points lower. If Parliament also adopts the new contributions act new week, then all working pensioners will be exempt from paying contributions”, the State Secretary underlined.

(MTI)