BBJ: Hungary’s tax authority has carved out a reputation for using digitalization to whiten the economy. How does it compare with its Visegrád Four peers and other EU members?

András Módos: Hungary is widely regarded as one of the most advanced countries in the EU when it comes to tax digitalization, clearly setting the pace within the Visegrád Group. The introduction of real-time invoice reporting, the mandatory use of electronic cash registers, and the eVAT system has created a comprehensive digital infrastructure that not only supports transparency but significantly reduces the scope for tax evasion. EY’s “Tax Policy and Controversy Outlook 2025” highlights Hungary as a jurisdiction with highly developed digital capabilities, underpinned by strong tax administration and analytics tools. Compared to its regional peers, Hungary’s digital measures are more integrated, more widely enforced, and have had a more measurable impact; most notably, the country’s VAT gap is now among the lowest in the EU. While many member states are moving toward similar systems, Hungary already operates a real-time, data-driven model.

BBJ: What are the most recent steps in this process, and what is coming down the line?

AM: The most transformative change on the horizon is the EU-wide rollout of the VAT in the Digital Age (ViDA) package. Approved by the European Parliament in February 2025 and expected to receive European Council approval soon, ViDA will fundamentally reshape the VAT landscape in Hungary and across the EU. The three key pillars of the reform (digital reporting and e-invoicing, VAT rules for the platform economy, and the expansion of the One-Stop Shop regime) will be introduced gradually over the next decade.

For Hungary, the most immediate impacts will be digital reporting and mandatory structured e-invoicing for cross-border B2B transactions, set to become compulsory by July 2030. These changes aim to reduce VAT fraud, close the VAT gap, and create a more transparent tax environment EU-wide. At the same time, they also present clear opportunities for businesses: automated reporting will streamline compliance, reduce administrative burdens, and improve data quality. Companies that prepare proactively can even gain a competitive edge through faster, more reliable processes and better resource allocation.

However, this transition will not be without challenges. Businesses must invest in secure, scalable technology solutions, ensure that contracts are adapted to the new environment, and maintain compliance in a rapidly evolving regulatory landscape. The shift to full e-invoicing will require careful planning and coordination within Hungary and across the EU.

BBJ: In line with these advances, Hungary’s tax morale (the willingness to pay taxes) has been improving. What is the state of this now?

AM: We see a positive trend. As digitalization brings more transparency, and enforcement becomes smarter and more predictable, taxpayer confidence has grown. The perception of fairness and the sense that the system rewards compliance are key factors in shaping taxpayer behavior. While there is still room to strengthen trust further, primarily through consistent and equitable enforcement, the foundations are now in place for a more cooperative relationship between taxpayers and the authorities.

BBJ: It seems impossible to talk about digitization today without mentioning AI. How do you think artificial intelligence will be used in the tax sphere in Hungary? What examples are already in play?

AM: Artificial intelligence is already starting to reshape how taxation works in Hungary, and its role is only expected to grow. The tax authority has begun using AI for targeted audit selection, where machine learning algorithms analyze large volumes of transaction data to detect anomalies and flag high-risk cases. This makes both selection and detection not only faster but also more precise. AI is also being used to improve forecasting models, support policy evaluation, and even help interpret unstructured data such as contracts or financial documents.

EY is playing an active role in this transformation, both globally and in Hungary. Through EY’s proprietary AI tools and platforms, we support clients in automating compliance processes, identifying tax planning opportunities, and minimizing risk. These tools are not theoretical; they are in everyday use by our professionals, including hundreds in Hungary who already work with Microsoft Copilot and other AI-based solutions. (EY has a long-standing global strategic alliance with Microsoft.)

BBJ: Allied to that, is digitization in the sphere leading to a need for fewer people or will it do so anytime soon?

AM: No, not in the foreseeable future – or at least not directly. AI and digital tools augment the performance of professionals rather than replace them—especially in a field like taxation, where judgment, context, and nuanced understanding remain essential. Those who embrace these technologies will become significantly more productive. Those who don’t might find themselves outpaced—not by machines, but by professionals who know how to use them. AI is a tool, not a substitute.

Moreover, tax advisory and compliance have always been a matter of trust to clients. Based on my experience, clients (who are humans, above all) trust their fellow humans with their most intimate tax matters rather than “discussing” them solely with computers or algorithms. And while I think that the use of digital tools (including AI) will be essential and inevitable, the human element cannot be circumvented. So, as long as humans pay taxes (either directly or through companies) based on regulations written by humans, there will be a need for human interaction on behalf of tax advisors. 

BBJ: Most commentators suggest that, while things have improved, there are still too many taxes in Hungary. What would you recommend to improve the situation?

AM: Simplification is key. While there has been progress, administrative complexity remains a challenge. Further streamlining of tax processes could greatly benefit businesses. The government has been consistent in its commitment to reducing burdens, and we expect digitalization and AI to unlock even more opportunities for simplification in the coming years.

At the same time, economies and the economic transactions performed within them are becoming more complex. Accounting and taxation systems are meant to reflect this complexity and be able to handle all the relevant transactions objectively. In the current environment, this is becoming ever more daunting and challenging. Overall, we can say that it is virtually impossible to create “catch-all” tax types that could handle (and tax) all aspects of value creation. This is why it is so difficult for governments to design simple tax systems. Nevertheless, for the sake of transparency, taxpayer morale and effectiveness, they should keep aiming to do so. 

BBJ: You have built a career in this field and seen many changes. Does it still appeal to younger generations? Are you able to attract enough young recruits in Hungary, or do you see this becoming a problem in the future?

AM: Absolutely, the profession remains highly attractive. Tax is a future-proof career; after all, as the saying goes, nothing is certain except death and taxes. Unlike other industries, taxation as a business is critical during economic booms (when companies want to invest in a tax-efficient manner) as well as economic downturns (when companies want to be as cost-conscious as possible). At EY, we have the largest tax team in Hungary, and we’re fortunate to work on exciting, high-impact projects for some of the biggest companies. The new generation is looking for meaningful work, development opportunities, and a dynamic environment; taxation delivers on all counts.

This article was first published in the Budapest Business Journal print issue of May 30, 2025.