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Taxpayers face closer scrutiny in 2012

Taxpayers will face closer scrutiny and tougher sanctions from the tax authority in 2012. But how will the authority cope with its new responsibilities?

While the national tax and customs authority, NAV, received 85 new tasks this year, the government in January announced plans to eliminate 577 jobs at NAV, under a government decree to cut a total of 6,719 public service jobs. According to economy minister György Matolcsy, only 48 NAV employees will actually be laid off, while 529 currently unfilled positions will be scrapped. In addition, an immediate hiring freeze was imposed as of January 12. NAV currently has 23,000 employees.

In 2012, NAV aims to secure tax revenues of HUF 10,500 billion, or more than 92% of total central budget revenue. This is HUF 1,000 billion more than last year, and it aims to achieve that figure by broadening the taxpayer base, according to deputy president Árpád Varga. NAV has about 4,000 auditors scrutinizing 1.6 million corporate taxpayers and 4.5 million individuals submitting personal income tax returns.

But NAV has not received extra funding to accomplish the additional tasks it received for 2012, the agency told the Budapest Business Journal. Thus, the only way to reach the revenue target is by reorganizing its workforce and doing significant extra work. The authority expects to see the first results of the new opportunities provided by the new regulations at the end of the first quarter at the earliest. In the first two months of 2012, NAV was preparing for the significant changes in regulations. 

Taxpayers beware!

NAV aims to use new means and methods facilitated by the new regulations entering into force in 2012. Under the new rules, auditing taxpayers carrying ‘high risks’ can be carried out more efficiently.  

With the new tax registration procedure, the authority hopes to prevent the establishment of risky companies. Under the increased authority control, NAV is entitled to place a registered company under close scrutiny at the beginning of its operations as well as for a certain period following a change in its ownership structure. 

New developments in risk management include the right to use publicly available (including online) information, which will help the authority to find businesses and individuals presenting high risks from a taxpaying point of view. Another method is trial purchases made by NAV, which ensures a broader tax authority presence as well as another way to gather information in order to make further potential audits more efficient.

NAV believes that it can exceed last year’s results by exploiting the benefits of the integration of the tax and customs organizations and the criminal area. Thus, the authority aims to continue the audit of bigger malls, markets and luxury providers, NAV noted. 

Decreasing tax arrears

Tax arrears had dropped by 2.5% by the end of January from the end of last year. NAV aims to increase the number of enforcement actions to collect debt. However, given the current economic environment, the authority says it will pay special attention to acting in a fair manner with troubled taxpayers, such as SMEs struggling with temporary payment difficulties. 

Tax arrears reportedly totaled HUF 2,215 billion at the end of last year. NAV’s main task is to ensure resources for public expenditure and the collection of taxes allocated by the Budget Act. Making the most of the assets at its disposal, the authority says it is working continuously to promote proper tax payments.