The approaching October 20 deadline has been kept the Hungarian business sphere on edge for quite some time. This is the cutoff for submitting the first EPR (Extended Producer Responsibility) declarations. While many details are still unresolved, it is already clear that attempting to deceive or withhold information is not worth it.
The extended producer responsibility fee is a completely new category in the system of obligatory contributions: it is obligatory to pay, yet it is not considered a tax. The fee is collected by a private market player, but its process is monitored by a designated state authority. Because of this, the introduction of new legislation is fraught with numerous uncertainties and questions of legal interpretation which will undoubtedly cause considerable headaches when the first data reporting is due on October 20. One of the questions related to this is the audits and sanctions: if EPR is not a tax, then who will be responsible for verifying the accuracy of the declarations, ensuring the payments based on the declarations, what tools are their disposal, and what penalties can be expected?
There's an authority, but it's not the Hungarian Tax Authority
The legislation clearly designates the authority responsible for overseeing compliance with EPR obligations: it is the National Waste Management Authority, operating within the framework of the Pest County Government Office. Like any authority, the National Waste Management Authority has various inspection powers at its disposal. Among other things, it can enter the facilities of enterprises, request documents and other records, and also make data requests to the tax authority.
Even more importantly, the authority will receive data from multiple sources for the effective enforcement of EPR obligations, and the selection of entities subject to EPR audits.
The authority will receive some of the information needed for effective enforcement directly from the Hungarian Tax Authority. The Hungarian Tax Authority, through environmental product tax declarations and the real-time invoice data submissions, possesses relevant information that can be automatically shared with the authority. With this information, the authority will likely be able to act effectively against those trying to circumvent their obligations.
Furthermore, the authority will receive data directly from businesses themselves. Additionally, the central entity of EPR system MOHU Ltd. (responsible for collecting the EPR fee from businesses), will enrich the authority's dataset. If this is not enough, subcontractors contracted by MOHU Ltd. will also be required to provide data to the authority on a quarterly basis. Within the scope of data reporting, the entities involved will have to provide information to the authority including the quantity and identification code of waste derived from received, collected, or pre-treated recyclable products.
However, it remains to be seen whether the National Waste Management Authority has the necessary technical infrastructure for processing the data and the personnel required for conducting audits. Nevertheless, given recent IT developments within, for instance, the tax authority, it is conceivable that the waste management organization will eventually have more information about individual businesses than the businesses themselves maintain. It's worth noting that Hungarian authorities are already extensively leveraging the possibilities offered by “big data”.
What Happens to Those Who Try to Evade?
Many are still unaware that they fall under the scope of EPR. However, there are certainly those who, knowingly or not, plan to evade their first reporting and payment obligations related to EPR. What can they expect?
In the initial period, audits are expected to focus on uncovering and identifying businesses intentionally bypassing the system and the legal violations they commit. In this context, the aim will be to enforce compliance by offending businesses. Therefore, in the first few months, there will likely be less emphasis on a thorough, detailed examination of compliance. However, this does not mean that one should not take the obligations seriously and strive to fulfill them to the best of their knowledge.
In cases of neglect or incorrect compliance, the primary consequence will likely be a request for correction of omissions or inaccurate compliance. In the event of an unsuccessful request, depending on the nature of the violation, the authority may suspend the circulation of the specific recyclable product until the business fulfills its registration or payment obligation.
Furthermore, there is the possibility of imposing penalties. However, the EPR legislation does not specify the exact amount or conditions for imposing penalty; instead, they refer to sector-specific legislation. Consequently, it is still unclear what kind of penalty will levy on the businesses if they fail to meet their EPR declaration obligations. Caution is therefore advised.