On December 4, 2015 the Hungarian Ministry for National Economy issued a press release stating that Hungary considers reverse-charge VAT to be one of the most effective tools against cross-border VAT fraud. The media release furthermore states that as Hungary represents a common stance with Czech Finance Minister Andrej Babiš, the Hungarian Minister (Mihály Varga) was urging the speedy formulation and adoption of a joint EU tax strategy.
According to the press release the Hungarian Minister pointed out that cross-border fraud has become business-like and well-organized as criminals had been exploiting the diverse regulation of various EU members states. In the opinion of the Minister, cross-border VAT fraud, which has been causing massive damage to national budgets and bolsters the black economy, can only be eliminated through taking a common stance within the EU. According to the Hungarian Minister in 2013 the combined VAT gap totalled EUR 170bn at the budgets of Member States. According to the press release more and more experts agree that the introduction of the reverse-charge mechanism could cut the number of fraud cases.
The press release continues by stating that Hungary has been making efforts for years to increase the number of goods and services for which the reverse-charge mechanism could be applied, but the European Commission has repeatedly turned down proposals concerning this issue. The Hungarian Minister stated there is no viable reason for the refusal, as Hungarian examples show that the reverse-charge mechanism has been effective for years in the sectors that according to the Hungarian Ministry for National Economy are worst affected by fraud, such as scrap metal and cereals trade or the construction sector. According to the press release the volume of cereals transports registered at several border crossings fell by 70 percent year-on-year. In the case of the construction sector, according to the press release VAT revenues soared by some 30 percent.
The press release concludes by stating that the Hungarian Government has since 2010 introduced several legal provisions and measures within the sphere of national jurisdiction which have proven effective against the black economy. The introduction of on-line cash registers, the Electronic Road Transportation Control System (EKÁER), reverse-charge VAT at the cereals and scrap metals trade, limiting the use of cash payments at enterprises, more frequent tax returns for high-risk taxpayers as well as the obligation to register food and beverage vending machines are measures that have significantly helped combat the black economy.
Another article that you might find interesting is our article from November 6, 2015 titled: “Austrian Minister of Finance will apply for a pilot project against VAT fraud”.
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