The 1st of July is a milestone in Hungary’s tax history: as of today, the National Tax and Customs Administration will be capable of directly seeing data of large VAT bills and vending machines for food and beverages. Besides improving taxation morale, these two measures are also expected to reduce the country’s tax gap to 10 percent of GDP within the coming years.

The supervision and control of vending machines is posing a challenge for each EU member state. After cash machines had got directly connected to the tax authority, it has become especially absurd that vending machine sales were still almost impossible to supervise. Neither the value nor the quantity of goods sold through these machines could be ascertained, and therefore it was also hard to judge if enterprises which operated these units paid the right amount of tax.

Through the introduction of the new scheme the Government was aiming to safeguard the interest of law-abiding entrepreneurs against systemic tax fraudsters.

The campaign to improve transparency in the sector began in 2015, when operators were obliged to register the machines. This measure already generated tens of millions of forints of extra revenues for the state budget and forced the removal of some five thousand vending machines which had been operated illegally.

The campaign targeting better transparency has now been completed, as from 1 July 2018 only machines fitted with a control unit are allowed to be used. The fact that a machine is connected to the tax authority is a clear motivator in itself: operators are aware that it is enough for NAV risk analysts to make a simple data comparison test to detect any turnover mismatch in the tax return.

In terms of VAT gap, Hungary already beats the countries of the region: according to a study by the European Commission, Hungary’s VAT gap was half the average figure of the Visegrad Four already in 2015, having fallen from 20.9 percent in 2013 to 13.7 percent by the year 2015.

(Ministry of Finance)