Hungary fully endorses the EU’s efforts targeting tax evasion; however, the Government of Hungary recommends the European Commission’s recently presented draft to be reconsidered, as this would eventually lead to disproportionate administrative burdens for enterprises, Minister for National Economy Mihály Varga said at the latest Ecofin session in Brussels. The finance ministers of EU countries have also discussed a report of non-performing loans. The proportion of so-called bad loans has been declining in Hungary, thanks among others to the phasing-out of forex loans, the Minister noted.

The Commission’s proposal would stipulate information obligation for bodies participating in the drafting and marketing of aggressive tax planning schemes as well as for those who eventually use these schemes. Those required to provide information must report to the tax authorities of their respective countries with respect to cross-border tax schemes involving more than one member state or one member state and a third country. This information is then to be exchanged among the tax authorities of EU member states.

As the Minister stressed, it was in Hungary’s interest to combat aggressive tax planning schemes, tax avoidance and tax fraud. Hungary has been among the countries which have made substantial progress in the fight against the grey economy; the on-line cash register scheme and the electronic road transport control system (EKÁER) have been adopted by several other EU member states, and in the summer of 2018 the next milestone is planned to be the introduction of on-line billing. Recently introduced measures have generated HUF 420bn of revenues for the state budget and assisted lawfully operating enterprises, Mihály Varga stated. On the other hand, this proposal does not guarantee at all that the costs of implementing the scheme could be recovered. In addition, the too broad and vague definition of reportable information could unnecessarily and disproportionately increase the burden of enterprises operating within the EU. Hungary is open to further discussion of the draft directive, which it considers to be incomplete in its current form, Mihály Varga added.

The most dangerous legacy left behind by the previous Socialist governments causing an economic, financial and social quagmire had been household debt. Since the current Government’s first term began in 2010, it has introduced several measures to ease the pressure on mortgage borrowers, including the phasing-out of forex retail loans in 2015 after a forint conversion scheme had been completed. Thus, the foreign exchange risk factor of loans has been eliminated, as the share of forex loans in this category has declined from 67 percent at the end of 2010 to below 1 percent. Thanks to the forint conversion of forex loans, families could profit from stable and calculable monthly instalments, and this has also helped reduce the share of non-performing loans.

As a result of various Government measures, a stronger economy and job growth, the share of loans with payments that are more than 90 days overdue fell from 10.5 percent at the end of 2010 to 7.7 percent by Q1 2017, he stressed. Thus, we have managed to fix a 1000-billion forint issue we had inherited.

(Ministry for National Economy)