• VAT Card

    Description of working principles of the VAT card created and represented by the Coalition Party, presentation of its beneficial effects on Hungarian economy

    The long time passed from the introduction of value added tax in Hungary showed clearly how different governmental task is to control the declaration, payment and reclamation of VAT.

    A number of irregularities, misuses and criminal acts relate to value added tax that mean significant loss of VAT revenue and extra expenses to the Hungarian State.

    Avoidance of declaration and payment of VAT payable and the illegitimate reclamation of VAT are present and frequent in Hungary widely, they already jeopardize operability and sustainability of the national economy and of the Hungarian State, thereby it means serious national security risk.


    For illegitimate reclamation of VAT well-organized gangs of criminals have been created that have bought employees of the NTCA, policemen, people working for other state organs and politicians over in many cases in order to be able to realize their fictive VAT evasion lacking real economic events without any risk and thereby to be able to take billions out of the pocket of Hungarian people.
    The criminal gangs growing rich from VAT evasions try to incorporate in Hungarian society, they legalize their money originated from cheating in this way. The property of many reputable and well-respected public businessmen originates from VAT evasions committed by them earlier. For their safety these men try their hardest to be familiar with political power and with the leading politicians, therefore, in exchange for their protection, they support politics materially and by other means too that is why none of the governments took real steps recommended by professionals in order to stop VAT evasions.

    Screening, control, discovery and sanctioning of the irregularities, misuses and criminal acts mean great burden and heavy expenses to the Hungarian State i.e. to every Hungarian citizen.

    The cases and tasks related to value added tax absorb the resources of the National Tax and Customs Administration, the police, prosecution, intelligences, courts and detention facilities to a significant extent.

    The substantial amounts used for the supervision of value added tax and for the sanctioning of misuses should be spent on aiding the more sensitive strata of Hungarian society instead, the basic condition of this aim is the moral of VAT declaration and payment, its significant improvement is the introduction of a new, more simple, clearer and more effective value added tax control system.

    For the more simple, clearer, safer and much cheaper handling of the value added tax the Coalition Party initiates the introduction of the Value Added Tax Card (VAT card), as follows: every Hungarian citizen that buys any product or uses any service, except for one or two cases subject to special rules, pays VAT in every case, as a part of the purchase price, which is 27% now in Hungary.

    One of the most frequent ways of avoidance and evasion of the payment of value added tax by the population is to buy or use a service without an invoice, without paying VAT thus the Hungarian State loses significant VAT revenue and it has to spend very significant amount el on the supervisions and procedures related to VAT.

    Hungarian citizens are not interested in the payment of value added tax because they have no interest in it, anyhow, the taxpayers’ morality and the extent of social liability are low “thanks to politics” (going halves, corruption cases, discredited politicians, etc.).

    Every Hungarian citizen gets a VAT card from the National Tax and Customs Administration that is based on the working principle of the banker’s cards and loyalty cards and that records the amount of VAT after each purchase or using a service about which they will receive a confirmation by electronic means immediately, making certain of crediting of VAT paid. Every Hungarian citizen will get back a certain percentage, depending on the net income, from the amount of VAT accumulated on the value added tax card during an accounting year not later than until 6th December of each year, by the day of Santa Claus; the Hungarian State will contribute to the celebration of Christmas by the citizens worthily.

    According to the proposal of the Coalition Party, the percentage of the reimbursement of value added tax based on the net monthly income would be as follows:
    up to HUF 0-200.000 per month – VAT reimbursement of 30%
    from HUF 200.0000 up to HUF 500.000 per month – VAT reimbursement of 10 %
    above HUF 500.000 per month – VAT reimbursement of 5 %

    The “Christmas” VAT reimbursement can be utilized by the population only and exclusively for and to the extent of the declared, net incomes after tax.

    With the introduction of the VAT card population becomes interested in the payment of value added tax against regular invoices because VAT will not be considered an amount paid to the State obligatorily but a kind of investment, savings for a year, received in one of the months with the most financial expenditures, in December, before Christmas.

    With the introduction of the VAT card system citizens will ask, demand the issue of the invoices, vouchers after the purchases or using services and the recording of VAT charged to the amount of the invoice on the card thus, due to their material interest, citizens will control the regular issue of the invoice and the indication of VAT themselves.

    Thereby it unburdens the State and thus the taxpayers to a significant extent which amount could be spent on social expenditures, education, establishment of workplaces, keeping the youth in the country, on health, on the public safety, etc.
    Technical background and operation of the VAT card

    The National Tax and Customs Administration opens and keeps a VAT account for every Hungarian citizen of legal age on which the amount of VAT paid by the citizen is kept and recorded. In relation to the VAT account a VAT card is given which records the amount of VAT paid on the invoices of the citizen. The card can be used in case of every terminal connected to a cash register that are present widely and in great number in the shops and at the entrepreneurs in our country.

    After the payment of the invoice’s amount the amount of VAT is credited on the VAT account of the Hungarian citizen kept by the NTCA through the cash register and terminal connected to the tax office. Simultaneously with this the citizen paying the invoice receives a notification about crediting the VAT and about its amount by electronic means, in SMS or e-mail immediately.
    The citizens can watch the balance of the VAT account by electronic means, for example, through the client’s gate, continuously, thus they always can control the crediting of the amount of VAT of the invoices paid by them and they will know exactly how much VAT reimbursement they can expect at the time of the annual payment before Christmas.

    Since nowadays underage children, under 18 years, living in the families also often buy things and use services, the underage family members receive junior partner cards related to the card of their parents so that VAT paid with their purchases also would be spent regularly and would not be missing from the domestic cash. After using these cards, the parents will get an electronic notification.

    The introduction of the institution of the VAT card will have beneficial effect both on national economy and on the market economy because it enhances morality of the taxpayers, decreases the burdens, expenditures and tasks of the state related to taxation and VAT, returns money to the population regularly, at a certain time, thus increasing the population’s purchasing power and, at the same time, it creates source of income to the entrepreneurs, thereby strengthening them, promoting the maintenance of workplaces and the establishment of new workplaces. The amount of VAT repaid to the population will be spent by the population again, which means VAT income to the State.

    The entrepreneurs gain additional income from VAT returned to the population on which they pay tax, contributing with this to bearing of the common public charges, to the operation of the State so VAT repaid by the State to the population returns to the State very quickly.

    With the help of the VAT card the population’s purchasing customs can be followed up, based on this statistics, statements can be prepared, thus supply can be adjusted to the population’s needs, thereby Hungarian economy becomes more predictable, stable and a result of the long-term foresight and planning can be the decrease of the prices of goods and services most wanted by the population which means the increase of the population’s living standard.

    With the introduction of the single tax rate the citizens having lower income got into more disadvantageous situation than well-off people and this intensifies tension between the social strata and between the strata having different incomes further.
    With the introduction of the VAT card the adverse effect caused by the single tax rate to people having lower income can be corrected, compensated. The application of VAT reimbursement allowed by the VAT card and bound to the income gives an opportunity to the State to bring the citizens with different income levels into more favourable financial position, with taking their financial position into account.

    The introduction of the VAT card does not mean unnecessary extra costs to the State, it is refunded and it has beneficial effect in the Hungarian economy, in the morality of taxpayers and in the mood of the citizens already in the short run. It generates significant savings, the decrease of the government expenditures.

    The introduction of the VAT card will incite Hungarian citizens to spend their income in Hungary not abroad, because they do not get reimbursement from their money spent abroad but they get a certain percentage of the VAT content of their money spent in Hungary back.

    Contrary to foreign countries, money kept and spent in Hungary strengthens Hungarian economy, strengthens national trade, service industry, the production and manufacture of the Hungarian products. One of the most important elements of the new economic reinforcement of Hungary is that the incomes produced in Hungary are spent and used in Hungary and the introduction of the VAT card promotes the realization of this very important national value.

    The introduction of the VAT card is a very good means to start the Hungarian economic motor.

    Misuses of the VAT card can be deemed excluded since it is a closed system controlled by the State.
    Citizens can get back only a part of the VAT amount paid on their net official income.

    The enterprises can indicate on the VAT card only the VAT for the invoice’s amount actually paid by the citizens, because if smaller amount is credited, the citizens will lodge a complaint since thus the amount of the Christmas VAT reimbursement decreases and they feel damaged. If VAT more than the amount of the paid invoice is credited on the VAT card, they have to declare it and pay it to the National Tax and Customs Administration so this means material losses to the entrepreneurs. The credits on the VAT card are accounted on the VAT account kept by the NTCA under the citizen’s name. The National Tax and Customs Administration will transfer the VAT reimbursement before Christmas bound to the VAT card to the VAT card used by the citizen thus from 6th December until 31st December the VAT card will operate as an instrument of payment. This construction excludes the participation of the banks in the system, thus the citizen buying with the VAT card does not have to pay any bank charges and other costs, the enterprises that accept the VAT card will account directly with the Hungarian State.

    In case if a citizen or an entrepreneur wants to cheat with VAT i.e. they want to avoid its declaration and payment, the introduction of the VAT card and the amount of the legal VAT reimbursement related to it will make the intention of cheating with VAT so expensive that the possible illegal income originated from it will not be proportionate to the risk of committal and to its punishment, thus the introduction of the VAT card will decrease the number of misuses related to VAT significantly.

    From the incomes concealed from the National Tax and Customs Administration no VAT reimbursement bound to VAT card can be utilized because VAT reimbursement before Christmas is possible only to the extent of the net, legal incomes stipulated by law. The introduction of the VAT card can make economy white.

    It intensifies the citizens’ feeling of certainty of existence and makes their life predictable and calculable if they know that they certainly will get a part of the VAT content paid by them in an accounting year back and they can watch the events of the VAT account bound to the VAT card (for example through the client’s gate) continuously thus they know exactly how much money they can expect from the Hungarian State before Christmas.

    It has to be stipulated by law that the Christmas VAT repaid to the citizen is qualified as special income thus its paid amount cannot be taken from the citizen in any form: debts, forcible collection, encashment, tax court, etc. According to the intention of the Hungarian State this amount helps Hungarian citizens in celebrating Christmas in intimate and peaceful manner.
    In the sorrowful case if the owner of the VAT card dies, the legal heirs, according to the applicable regulation, will receive the amount returnable from the VAT paid by him/her so far.
    Summarized once again
    From their purchases against invoices in the whole year Hungarian citizens will get back 5%-10%-30% of the amount of VAT paid by them, depending on their income, with the help of the VAT card in such a way that from 6th December, the day of Santa Claus, until 31st December the VAT card used by them in the whole year will operate as an instrument of payment.
    With the VAT card every Hungarian person will have the opportunity to celebrate Christmas worthily, every person will have rich festive board, no one will be pressed and parents will be able to buy the long-desired presents to their children.
    The national entrepreneurs, suffering from the weakness of domestic economy for a long time, because of the VAT card can expect huge increase of turnover and income from 6th December until 31st December in each year, since the purchasing power and buying interest of the Hungarian population will increase significantly.
    According to the market regulations the entrepreneurs will try their hardest in order to the customers having VAT card purchase from them therefore they will attract the customers and lead them to buy with different actions and discounts.
    Because of the pre-planned turnover in December generated by the VAT card the traders can attain and agree on more favourable prices with their suppliers. The expectable achievement of this economic process is that the purchasing power of the money of Hungarian people will increase. Due to the healthy economic competition generated by the VAT card people will get more goods for their money.
    The Hungarian State also will profit from the introduction of the VAT card because, as it was written above, the costs related to supervision and sanctioning will decrease, the incomes from VAT will increase and the Hungarian economy will become whiter. For the increased turnover the enterprises will pay more tax, VAT and contributions, they will be able to ensure job and income to more people, thereby unemployment, so depressing today, will decrease and simultaneously the huge expenditures allocated by the Hungarian state to the unemployed too. Payments can be made with the VAT card only on the territory of Hungary, cash cannot be withdrawn by it. No proceedings of forcible collection can be initiated for the amount on the VAT card. Money on the VAT card cannot be carried over to the next year, it has to be spent by 31st December.
    The unexpended amount will return to the Hungarian State automatically. With these conditions it can be guaranteed that the amount paid by the Hungarian State to the population on the VAT card certainly returns into the circulation of the Hungarian economy. It attains to the entrepreneurs, it makes profit there, intensifies economy, maintains the existing workplaces and establishes new workplaces, thereby ensuring subsistence to Hungarian people that want to work at home and, finally, it returns to the Hungarian State in the form of taxes and contributions. Every participant will gain from this financial circulation equally, no one will lose: the population will get an extra source at the end of the year, which can be considered salary of the thirteenth month, pension of the thirteenth month or VAT decrease. The enterprises will get solvent customers that certainly will spend their money received on the VAT card until 31st December to the full.
    The Hungarian State will get satisfied citizens, more tax and contributions will be paid in the treasury and the costs related to supervision will decrease so it can be stated that the introduction of the VAT card is a construction with three winners, which is able to establish future and subsistence to the entire Hungarian nation.

    Zsolt Szepessy

Leave a reply.