Concerns Expressed On The State Of Hungary's Preparedness For EU Accession

by Ulrika Lomas, Tax-News.com, Brussels

29 January 2004

According to local media reports, tax professionals warned this week that many of Hungary’s businesses will face substantial tax-related difficulties after the country’s accession to the EU, owing to a general lack of preparation by both the government and companies to legislate and adopt new VAT rules.

“Only a handful of companies have done something meaningful to prepare for the changes EU accession will bring. Others are late, and will be late even if they start now,” observed Robert Heinczinger, tax partner at Ernst & Young Advisory Kft, in a Budapest Business Journal report.

Alhough many observers point out that a lack of legislation in this area has significantly hindered firms’ preparations for the new trading environment, Heinczinger argues that business could be doing much more to help itself.

“It seems a good excuse to say that the new VAT legislation has not been passed, yet. But preliminary work could have started, based on the EU’s Sixth Directive, a long time ago,” he observed.

Exacerbating the problem will be the necessity to change and implement new IT systems, databases, invoices and other documentation. “If the Hungarian VAT law is only approved in March, there will be one-and-a-half months to carry out all the changes,” observed Gabriella Nink, tax partner at KPMG Kft, according to the BBJ.

Meanwhile, others warn that a chaotic transition period for Hungarian business could have significant repercussions on the economy’s overall competitiveness.

"For the cost of a year’s taxes and contributions, an entire factory can be relocated to a different part of the world,” warns Balazs Bekes, a partner and head of the tax and legal advisory department at Deloitte Advisory and Management Consulting Kft.

“Hungarian lawmakers must do their best to legally create the most favourable tax environment, in order to maintain the country’s competitiveness in the EU,” he commented.

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