Hungary will not collect several billions of missing tax income from fraudulent automobile manufacturers

The Hungarian Ministry of National Economy is not planning to collect the billion of Forints of tax missing from the state’s budget because of fraudulent automobile manufacturers. That was revealed in an exchange of letters between Clean Air Action Group (CAAG) and the Ministry. According to the NGO this conveys a very harmful message, as a deliberate crime has been committed without any consequences, suggesting that the state is not able or not willing to act against similar fraudulent activities.

Environmental organizations have long argued what was proven to the general public in October 2015: several car manufacturers were not providing truthful data about the harmful emissions of the vehicles they produce. Often, the vehicles emitted up to 40 times more nitrogen oxides than the amount declared by the manufacturer. Some car manufacturers provided false data not only by taking advantage of legal loopholes during the testing of vehicles, but also by illegally placing a software in the cars, which controlled the nitrogen oxides neutralizer unit in the exhaust pipe so that it worked correctly only on the test bench. Tens of thousands of vehicles registered and operated in Hungary are involved in the diesel emissions scandal.

Besides causing inestimable environmental and health damages, cheating with emissions data has also significantly decreased Hungary’s tax income. The car registration tax – payable when a vehicle is put into operation – and the motor vehicle tax both depend on the vehicle’s environmental classification, which is based on the officially certified environmental performance. Therefore, the tax collected for the vehicles involved in the diesel emissions scandal is tens of billions of HUF less than the tax amount due based on real-life emissions. Clearly, the people who purchased the cars were not aware of the fraud. They trusted the official emissions data in good faith, therefore they are not liable for the damages caused. However, the responsibility for the consequences can be traced back, and the liable persons can be identified, which would set a legal ground for demanding compensation for the caused damages.

CAAG requested information from the Ministry of National Economy about the steps which had been taken or were planned to be taken in the future regarding this issue. The Ministry responded that it cannot step up against the fraud, because the above-mentioned tax amounts are being calculated based on the data in the public register and in the vehicle type approval permit, but the data are not correct in these registers. According to CAAG, however, the responsible persons and the beneficiaries of the fraud can be unequivocally identified, because the data in the public registries is based on the information provided by the car manufacturers. Furthermore, the Ministry’s reasoning is inconsistent, because in case of other tax types, providing false data to the authorities is not only a case of violating a tax regulation, but can be prosecuted as a serious crime.

The other major argument in the Ministry’s response was that the vehicle taxes are determined by self-assessment, and the car owners trusted the data in the car’s registration book in good faith, therefore they cannot be held responsible for the damages. CAAG also argues that the innocent purchasers of cars should not be punished, however the responsible entities can be easily identified, especially because regarding the registration tax, in most of the cases the taxable entities are not natural persons, but importer companies belonging to the same interest group as the manufacturers of the vehicles.

CAAG informed the Ministry about the above concerns, and it had to wait for almost a year to get a reply, which, however, only repeated what had been reported in the Ministry’s earlier response.

We are disappointed, because there is not much chance anymore for collecting billions of missing tax retroactively. Moreover, the amount of tax which is currently being paid after the involved vehicles falls short of the correct amount, as if the manipulation of data never happened”, said András Lukács, president of CAAG. “In the U.S, for example, the managers of the departments involved in the software fraud were issued a prison sentence – besides the astronomical penalties.”

Translated by: Katalin Tarr