Without having to read the article in full, we would like to respond to the question in the title. Yes, the tax authority can be good, and there are many areas where this statement proves to be true. After the 2nd national tax consultation, we can support this with facts too. In the article we will share why we think the Hungarian tax authority is good.
We move forward with the times
Electronic administration was one of the main topics of the tax consultation. The NAV has recently devoted incredible energy (and money) to make electronic access and administration more modern. As a result, many just had to open their prepared personal income tax returns on the special e-PIT site of the NAV and saw that the NAV’s figures were correct, so they did not have to spend a long time preparing their tax returns. The NAV’s 2.0 programme set even more forward-looking goals, and the Hungarian tax authority could easily become the most modern tax authority in Central and Eastern Europe.
As tax consultants, however, we do not believe an automated program can replace knowledge requiring special international taxation expertise in the future. Besides this, we would be happy to see electronic methods as the primary mode of communication, and the problems receiving official documents by post can be forgotten.
The new Act on Rules of Taxation
We have already written an article about the changes in the procedural rules of taxation, the other key topic of the tax consultation, as well as about the new framework law and the new Act on Rules of Taxation. It should really be appreciated that legislators as well as officials at the Ministry for National Economy and the NAV stood by the idea that stakeholders should be able to express their own opinions on a tax procedural law of such magnitude, prior to submitting the draft to the national assembly (which is expected to take place shortly). One of the most important achievements of the social consultation, one that WTS Klient Hungary also indicated to the legislators, is that although the amount of late payment interest will increase from 1 January 2018, the self-revision interest will still be tied to the central bank’s key interest rate, as if “in appreciation” of voluntary corrections.
Tax authority as a service provider
We react differently when we are required to do something compared to when we are asked to do something. In practice, the NAV’s cooperative procedure both increases budgetary revenues and makes us feel we have a second chance in the event of an error, before the tax authority collects the taxes during an inspection. From 2018, new steps are expected to strengthen the service provider nature of the NAV. The mentoring of newly formed enterprises by the NAV and the list of reliable taxpayers, which will hopefully be published in the future, will serve the interests of taxpayers. Additionally, the NAV would provide online access for taxpayers for reporting/change reporting, to help them fulfil their obligations, and if we can believe the news, the NAV would also make free invoicing software available for online invoicing that would be able to handle the immediate reporting of the data on invoices exceeding HUF 100,000 (approx. EUR 320).
Online invoicing – online data reporting
The new legislation turning invoicing into online data reporting will enter into force from 1 July 2018. We are talking about immediate data reporting here, but there are a lot of questions regarding its practical implementation. Again, the positive side of the story is that taxpayers will have time to prepare for the changes: they can view the related draft decree, while a new draft is expected based on the comments received from taxpayers. It is no wonder they are proceeding carefully. Online invoicing can be considered an IT issue which should be solved by IT experts, but it is almost certain that there will be companies even after 1 July 2018 which will find it difficult to carry out this task. It is enough to think about the taxpayers registered for VAT purposes in Hungary who have their own invoicing software, but their operations in Hungary are just part of their overall business, and so even just separating Hungarian invoices may actually cause problems for them. As for the positive side of online invoicing, it should be noted that it will replace the detailed domestic summary report of outgoing invoices by the party issuing the invoices, while taxpayers would definitely be happy with a function in the system enabling them to learn which taxpayers had issued invoices to them.
2nd national tax consultation and marketing
The information above shows that the NAV, which has gone through major downsizing in the meantime, is really taking some forward-looking steps. During the national tax consultation, the tax authority demonstrated its marketing arsenal, since it is not only corporations that need positive marketing. Partnerships and communication between taxpayers and the tax authority create an opportunity for the smooth receipt of budgetary revenues.
For us as tax consultants, the problem or risk (if we can voice some criticism about the Hungarian tax authority) is that in terms of inspections, the system of sanctions or the default penalties established for the online data reporting based on the “number of defaults” are determined in a way that is not in line with the level of the defaults. We trust that the tax authority is striving to increase its tax revenues, and not its penalty revenues.
RELATED ARTICLES:
A new Act on Rules of Taxation and tax administration procedure law
Cooperative procedure – new customer-friendly NAV concept
Online invoicing from 1 July 2018
VAT-registered taxpayer now also defined in law: how can they interact with the NAV?
