While dozens of programmers, engineers and hairdressers continue to opt for KATA [the fixed-rate tax for enterprises categorised as “small taxpayers”] in Hungary, the tax is increasingly coming under fire from all sides. Apparently, the Hungarian Tax Authority (NAV) is stepping up its investigations into businesses who employ KATA payers, and at the same time rumours are also flying about a planned KATA tightening.

During a posting, the employee is bitten by a tick. He throws his back out while loading. He gets sunburnt while working outside. A common feature of these cases is that they are all accidents at work. Yet, if the employer does not pay attention to these, he can find himself at a serious disadvantage.

A recently released NAV guidance gives a list of those signs that could indicate that a security firm is involved in VAT fraud. The list will certainly help companies that accept invoices from such security firms, but it’s still a pity that the guidance wasn’t issued ten years earlier.

Since January this year, it’s been more difficult than ever to litigate in Hungary. Courts have been rejecting countless petitions, filed by even the most experienced lawyers, citing professional inaccuracies or formal errors. The stringent policy is likely to prompt parties with grievances to use alternative forums for the settlement of disputes.

The popularity of simplified, or “small” business taxes (KATA, KIVA) grows unabated, with thousands of engineers, computer programmers, hairdressers and lawyers opting for one or other of these schemes. Meanwhile, few are fully aware of the risks that these types of tax can entail. The potential consequences are measurable in hard tax forints and penalties, both for payers of these forms of tax and for the businesses that provide their income.

Winning a tax lawsuit is a difficult and lengthy process, and often there are no guarantees of victory even when you’re totally confident that you correctly accounted for every transaction. So it’s worth paying particular attention to the opportunities for triumphing over the tax authority relatively easily and without any complications. What is more, recent case law has expanded the range of these options.

There is no use of winning a lawsuit against the tax authority if the enterprise goes bankrupt before the judgement is rendered. And such an outcome is by no means uncommon, as under the current laws the tax authority can initiate enforcement proceedings against a business while the suit is still in progress. What’s more, experience shows that the tax authority doesn’t shy away from enforcement even in the absence of the solid legal grounds for pursuing that route.

Don’t worry! There aren’t any such taxes for the time being. But we do have taxes on tasteless buildings, boat tax, pony tax, telephone mast tax, tractor tax, and even arable land tax – just to mention a few of the municipal taxes that add spice to our everyday lives. We aren’t completely defenceless, however, if the local authorities do try and levy any of these taxes on us.