The Hungarian Parliament has started the general debate concerning the new bill on the mandatory filing of country-by-country report by multinational enterprise groups (MNE Groups) located or operating in the EU. The aim is to hinder the aggressive tax-planning practices of the MNE Groups with a total consolidated revenue equal or higher than €750 million by strengthening the mandatory exchange of information. Increased transparency could have the effect of giving MNE Groups an incentive to abandon the above practices.
The new bill submitted by the Hungarian Government is the implementation of the 2016/881 EU Directive (DAC4) amending Directive 2011/16/EU on the mandatory automatic exchange of information in the field of taxation. Furthermore, it serves the purpose of the execution of the Action Plan on Base Erosion and Profit Shifting of the Organisation for Economic Co-operation and Development (OECD BEPS).
By the adoption of the bill, the Hungarian tax authority would have access to data of more than 60 states that concerns MNE Groups. That information would enable the Hungarian tax authority to react properly to aggressive tax practices by undertaking adequate risk assessments and tax audits. Such audits are proven to be successful in Hungary, as in the last two years more than 1650 investigations have been closed with the result of a discovered net tax difference in the amount exceeding HUF 81 billion as 85% of the investigations determined tax shortcoming or inadequacies.
By Eszter Kamocsay-Berta, Partner, KCG Partners Law Firm