Friday, 28 September 2018

Actions against tax fraud bring a better world for the good-faith taxpayers too

Considering the low direct tax rates similarly on corporations (9%) such as on private persons (15%), the reducing social security charges (19.5%) and the ceasing sectoral taxes; Hungary has a more and more attractive tax environment, even in a wide international comparison. At the same time, Hungary is continue to play increasing attention to compliance and introducing new and new actions – mainly administrative measures – against tax evasion. This, especially during implementation, undeniably triggers significant costs and administrative burden for the stakeholders. The new era of digitalization; however, gives the role for control solutions that will finally reduce manual administration and “competitive advantage” of tax fraud too.

Stability and fair competitive market are surely among the most important factors for good-faith businesses when deciding about their location for investments and long-term operation. Germany is the most significant investor (almost 30% of the entire FDI) and the most important foreign trade partner (about 28% of export) for Hungary. More than six thousand German companies operate in Hungary, employing a total of over 300,000 people, according to a survey by the German-Hungarian Chamber of Industry and Commerce (DUIHK). Therefore, German companies’ level of satisfaction and their willingness to invest in Hungary had always been very important to the Hungarian economy.

The online cash registers (2013), the Electronic Public Road Trade Control System (“EKAER”, 2015) and from now on the online invoice data reporting (July 2018) are 21-century solutions providing maximum control mechanisms for the Hungarian Tax Authority. Their role in the struggle against black economy, for the reduction of VAT GAP is unimpeachable. Although Hungary proves to be a pioneer in such digital tax control solutions, this fits to the mainstream world tendency supported by OECD and EU. Considering their efficiency, the spread of such solutions is highly expected in surrounding economies soon. In harmony of the important goals, the failures lead to serious penalties: 40% of the product value for failures in EKAER, 500 thousand HUF per invoices in the online invoice data reporting.

The fact; however, that such digital tax control systems give immediate insight for the tax authorities into the business transactions requires a change of attitude in business administration: as failures can be visible for the authorities immediately, the internal processes should be developed to ensure correct handling even before the reporting itself. The time for instant tax audit from the distance has already started. Our business information is analysed by risk assessment software supported by the artificial intelligence tools. Being aware of this, the importance of internal control mechanisms, health checks and system analyses significantly increases. Do not hesitate to ask professional support from renowned advisors in reviewing and improving your corporate processes in the field of taxation.

Keeping in mind the above, nowadays everyone focuses on the implementation of online invoice data reporting in Hungary. Although much software – especially the big international ones – still requires development for meeting the requirements; their defaults generate need for actions in the business too; for example in consideration of self-billing problems, discounts, invoice correction chains, collective invoice corrections and bonus policies.

Regardless of this, do not forget that preparation won’t end with the proper operation of the invoicing software. You should also be ready for errors and warning messages from the tax authority. For preparation error management processes should be determined and documented, preferably within an invoicing policy of the company. Considering the consequences, if you are not sure in perfect operation of your invoicing processes, outsourcing can be the solution.