Since the introduction of the online era, in Hungary in five years the so-called VAT gap has fallen by 12 percentage points. According to a study of the European Commission released on Thursday, the government’s measures seeking to whiten the economy are successful, and thanks to this, by 2018 the rate of tax evasion has shrunk to a single-digit figure which is exemplary even in the European Union.

Minister of State for Tax Affairs Norbert Izer said based on the Commission’s study, in Hungary the estimated rate of the VAT gap, meaning the VAT revenue not actually received by the central budget, has fallen from 21 per cent in 2013 to 9 per cent in 2018. The most significant reduction was achieved during the period between 2017 and 2018 when, based on the preliminary estimates of the Commission’s experts, the rate of the tax gap may have fallen from 13.9 per cent to 9 per cent. The tax evasion rate below ten per cent is exemplary not only because it is below the EU average, but also because this reduction in market players’ tax gap was achieved within a very short time, he added.

He recalled that the online era of the whitening of the economy started on 1 September 2014 as this date marks the beginning of the mandatory use of online cash registers. The live operation of the Electronic Public Road Transportation Control System started the following year, while the third pillar of measures countering tax fraud debuted on 1 July 2018: the system of online billing which played a significant role in the reduction of the rate of the tax gap to just 9 per cent last year.

Outlining the latest data, the Minister of State said businesses have to date submitted invoices worth some HUF 53 billion via the system of the National Tax and Customs Administration. With the aid of the continuous influx of data, the tax authority’s risk analysts detect almost immediately any risks that may emerge on the part of taxpayers, and inspectors are able to swiftly respond to them, Mr Izer said summarising the advantages of the online system.

The online billing system has proved its worth also according to the assessment of market analysts. By their calculations, in one year it has generated an extra revenue of some HUF 200 to 250 billion for the central budget, he observed, adding that in 2019 the rate of the tax gap could decrease even further as this year is the first year when the impact of online billing on revenues extends to the entire year.

In Brussels, in the case of each Member State, experts annually measure the difference between expected VAT revenues and actual proceeds. This is the so-called VAT gap which includes, in addition to the budget revenues theoretically lost due to tax evasion, any loss of revenue due to insolvency, liquidation and other sums calculated with a view to other Member State-specific factors.