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It is easy to see, however, that audits
can only be truly effective if they reach primarily those who are most likely
to have a need to hide. The tax authority does not impose an unnecessary
burden on those who are fundamentally honest and diligent in their tax
duties. This approach, i.e. action proportionate to compliance with the law,
is what the tax authority represent. But it's also worth looking behind the
principles, so in addition to this year's audit trends, we also report on
previous experiences.
The authority therefore tries to treat
all taxpayers as they "deserve" to be treated: to help compliant
taxpayers to become more efficient, to help those who make mistakes or errors
to interpret the rules correctly, to control those who pose a risk and to
punish fraudsters. The basis for this and for targeted selection is the risk
analysis, which is based on the collection of online, real-time,
transaction-based and internationally collaborative data that has become
increasingly common in recent years. These are analysed by the in-process built
automation systems on one side, and by the colleagues of the tax authority on
the other side, if it is needed. Based on the results, taxpayers are asked
for self-revisions, contacted or selected for self-audits.
The effectiveness of this procedure
can be perhaps demonstrated by the drastic reduction in the VAT gap (the
difference between estimated and actual VAT collected) compared to previous
years. Unsurprisingly, one of the most effective areas of audits has been
precisely the investigation of discrepancies between the real time reporting
system and the VAT returns. The number of tax audits was also very high, but
the resulting tax difference were also very high: 11,000 inspections determined
a tax difference in the amount of 54.3 billion.
Another area of success, according
to the audit indicators, was the detection of employment-related
irregularities: almost 1600 audits revealed a tax difference in the amount of
3.6 billion. From the point of view of efficiency, the issue of the
settlement of employee relations must be highlighted, with an almost 50%
efficiency rate. Last year, tax auditors have checked about 94,000 legal
relations in about 7,300 companies and settled more than 46,000 legal
relations.
Although there were fears that
last year's personal income tax refund would attract fraudsters, fortunately
this did not happen.
Nevertheless, out of 25,000
audits, 4.5 billion of tax deficit on personal income tax was detected.
In order to identify the reasons
for the discrepancies in employment relationship notifications and in the
payment of contributions, the authority has carried out a large number of
support procedures: Out of 1000 procedures, 600 were successful, however
often only the missing deregistration formulars caused administrative errors.
In this area, a difference of 317 million HUF in contributions was detected.
Last year, 628 audits were carried
out among the largest, or priority taxpayers, and more than HUF 2.7 billion
in tax deficit were detected.
It is also worth noting that
international data exchanges also supplies data to the Member States, which
are also entered into the tax authority’s information database. Although some
of these are of varying quality, sometimes they are not fully reliable,
authorities are paying increasing attention to these external control data.
In 2022, investigations could only
be carried out based on data received from 2018, but even this way, 1600 out
of more than 2800 procedures were successful and discrepancies of around 300
million HUF were detected.
However, regional tax authorities
make much more effective use of this data because they know their taxpayers
better, as demonstrated by the studies carried out in the framework of the
DAC6 information exchange. This means that if a taxpayer sets up a company
structure with the involvement of an adviser that could be used for tax
avoidance, the adviser must report it.
In this area, 30 procedures -
still considered to be supplementary investigations - revealed a tax
difference of HUF 235 billion, which represented a tax increase of HUF 260
million. They are selected for this test based on transaction value,
operation in a low-tax country, affiliation status and prominent operational
data such as loss-making.
Finally, interesting lessons can
be drawn from transfer pricing audits, where tax authority investigations can
even reveal sector-specific results. One of the areas highlighted in 2022 was
the automotive sector, where a significant tax gap has been identified, which
could be due to trivial errors such as missing or not updated transfer
pricing documentation.
It may be a content error if they
define the "character" of their company incorrectly: e.g. they are
not a full-risk producer while they classify themselves as such. It may be
that the wrong benchmark is chosen in the valuation of the transaction, or
the data may be wrong, or the profitability range may not be properly
defined. Based on last years’ experience, even more in-depth checks are
expected this year, so everyone should review their documentation now and
update it if necessary.
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