The corrupt Hungarian tax authority

Since the fate of the internet tax is still pending, let’s turn to the systemic corruption that has a debilitating effect on the entire Hungarian economy. The existence of corruption on all levels of the administration didn’t escape the attention of the demonstrators who were brought to the street by their concern over the government’s plans to restrict access to the internet through onerous taxation. They protested against the “mafia government” and chanted slogans about thieves who become rich off their own hard-earned money. They deplored the activities of the corrupt officials of NAV, the Hungarian equivalent of the American IRS. NAV spends untold millions if not billions trying to track down small fry while letting the big fish off the hook. Or worse, it is alleged, high officials of NAV receive kickbacks from corrupt businessmen for services rendered. And what is the most disturbing about this whole story is that the highest officeholders of the government party, Fidesz, have known about these fraudulent activities–and have benefited from them–for years.

How can I say with such confidence that members of the government and the party have been aware of these illegal activities for a long time? Almost a year ago András Horváth, an employee of NAV, spilled the beans. He collected evidence that proved that certain crooked businessmen were receiving preferential treatment by NAV. In the wake of Horváth’s revelations nothing happened. After a quick internal investigation, NAV declared that Horváth’s accusations were baseless. And, for good measure, they fired Horváth. Soon enough the police arrived at Horváth’s apartment and took away the evidence.

The fraud that high NAV officials “overlooked” involved all sorts of financial shenanigans that resulted in Hungarian businessmen not paying the admittedly very high 27% value added tax on certain agricultural products like sugar and cooking oil. With that move, and with the active assistance of the Hungarian tax office, these crooked Hungarian businessmen gained a considerable advantage over their main competitor, the American firm Bunge. These Hungarian businessmen were the ones András Horváth was talking about and who are now, after the American revelations, suddenly  in custody. Without the American announcement to ban certain individuals from entering the U.S. these people would still be writing out their fraudulent bills of sale. The thoroughly corrupt Orbán government had no intention of doing anything about the crooked businessmen or, as it turned out, the equally corrupt tax officials. The American ban is invoked only in countries where there is no hope for justice because the government itself is corrupt. Usually third-world countries.

With the American revelations Horváth’s accusations were corroborated. Horváth and Goodfriend obviously were talking about the same cast of characters. But the Americans added another crucial piece of information that Horváth couldn’t have known about: high NAV officials offered their services to the CEO of Bunge for 2 billion Hungarian forints, to be paid to a foundation with ties to Fidesz. In return, they offered a lowered VAT on foodstuffs, a demand of long-standing by the honest producers of sugar and cooking oil. For this sum they also offered to go after Bunge’s competition.

The government’s reaction to all these revelations is fascinating. First, government officials–most notably Mihály Varga, minister of national economy who is in charge of NAV–focused on the corrupt businessmen, ignoring the NAV officials. Why is the Hungarian government accused of doing nothing? After all, three or four people are already in custody. When asked about Ildikó Vida, the corrupt head of NAV who was seen at Vienna’s airport leaving for an unknown destination, he played the innocent. Vida is taking her vacation, to which she is entitled. To the question whether Ildikó Vida is banned from the United States as rumored, Varga announced with a straight face and a hefty dose of the exculpatory conditional, that if she were, surely she would have reported this fact to him as she is supposed to.

Who is this Ildikó Vida? She, like almost all Fidesz bigwigs, lived in the countryside before she entered law school in Budapest. (One reason for the heavy concentration of non-Budapesters among the original Fidesz leaders is that they lived in university dormitories.) Vida was also a member of the by now famous Bibó College which Orbán; Lajos Simicska, former treasurer of Fidesz and now a wealthy businessman; László Kövér, president of the parliament; and József Szájer, a member of the European parliament, attended.

Ildikó Vida at her desk

Ildikó Vida at her desk

As one Hungarian media outlet complained, we know very little about the president of NAV. She does not have a large Internet presence and NAV’s webpage has no biographies of the organization’s top leaders. However, she seems to be a very important person in Orbán’s mafia state.

About a month ago a long study by atlatszo.hu, one of those NGOs who receive money from the Norwegian Civil Fund and whom the government is trying to defund, identified the key persons who “captured the Hungarian state.” Ildikó Vida is among them. She must know about the siphoning of public money into Fidesz coffers and most likely into Fidesz politicians’ own pockets as well. Lajos Simicska, whom Orbán called a “financial genius” but who elsewhere would be considered a criminal, was put in charge of the tax office in 1998 as soon as Orbán won the elections. His job was to get rid of all the incriminating evidence about the illegal financial activities of Fidesz-owned businesses that folded and were subsequently “sold” to people unreachable by Hungarian authorities so their unpaid taxes couldn’t be collected. Ildikó Vida was one of Simicska’s deputies and, once Simicska left a year later, Vida became the head of the almighty APEH, the predecessor to NAV. Most people assume that APEH under Vida was no better than NAV is today. I assume that then, just as now, the tax office serves three purposes. One is to assist certain businessmen close to Fidesz to gain an advantage over their competitors by closing their eyes to their fraudulent activities. The second function is to extract money from business leaders, part of which goes to party coffers through an intermediary, like a foundation. And third, the tax office frightens certain persons and businesses Fidesz does not deem friendly to the party and the government into submission. In brief, the picture is grim–and I suspect we don’t know the half of it.

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48 comments

  1. Ond word: incredible. I hope it is not true, I fear it is. How sad then, that 75% of the Hungarian people voted for Orbán, after the corruption under the previous govenment, only to awaken now to similar threats to honesty. Let us hope we find the way back to a government and to officials who serve the people.

  2. Jan Hink: You got the statistics wrong. 73% of Hungary’s eligible voters DID NOT vote for Mr Orbán. 27% of eligible voters did. That is a big difference. The Fidesz WON two-thirds of the seats in Parliament as a result of the endorsement of only a quarter of the eligible voters. Ever since the elections, Fidesz is regularly misinforming the public at large, that two thirds of Hungarians have voted for it. Nothing could be further from the truth. In fact, the governing power is on very thin ice, Hungarian public opinion is very brittle, and if the Party’s mafia tactics and predatory activities gain more attention, there could well be a breakthrough.

  3. @Jan Hink
    “How sad then, that 75% of the Hungarian people voted for Orbán”

    % of the adult population that voted for Fidesz:

    2010: 33%
    2014: 27%

  4. “But the Americans added another crucial piece of information that Horváth couldn’t have known about: high NAV officials offered their services to the CEO of Bunge for 2 billion Hungarian forints”

    Firstly the above sentence is false. The Americans did not add this information, it was a speculation by one of the newspapers. Bunge was investigated by NAV for tax fraud. Bunge is still currently under investigation for tax fraud by NAV. It is in the interest of Bunge to try to make their tax fraud disappear. If the Bunge tax crime hits the news it will damage the reputation of the company. It is highly doubtful that anyone would offer to make the Bunge tax fraud go away, by themselves it is usually the other way around. Bunge approaches people if Bunge wants something done. The corrupt company that wants something disappeared, something altered, goes to officials and offers up money in exchange for services.

    We only know that the deal didn’t go through in this case, most likely because one side refused the offer. But corruption always takes two parties to negotiate.

    The fact that Bunge committed massive tax fraud in Argentine where they were deleted from registration supports the theory that it was Bunge that made the offer because it wanted to squash the investigation into the massive VAT fraud perpetrated by Bunge.

  5. Former Constitutional Court judge (1990-1999) Imre Vörös:

    The current Parliament and the Budapest Assembly were elected illegitimately, in unfair, unconstitutional elections.

    The power of the government is the result of a legal coup d’etat.

    Unconstitutional laws, laws that contribute to the establishment of tyranny can be and should be resisted.

    http://www.vasarnapihirek.hu/fokusz/alkotmanyos_jogunk_torvenyt_szegni_interju_voros_imre_volt_alkotmanybiroval_jogaszprofesszorral

  6. Eva, your blog is excellent, congratulations!
    But according to my feelings fellow commenters are too serious.
    I know you are professor and facts are important.
    However, mostly Hungarian read and comment the blog
    It was long ago when I checked how many followers you have (it was cca 1500),
    Is there any survey about this issue?
    A strong competitor is Kanadai Magyar Hírlap in Hungarian. Of course, assholes also comment…..
    Should you disagree, do not hesitate to let me know.

    best regards, Happy Halloween!

    Dénes

  7. Eligibiity, Majority and Plurality

    Dear resourceful, reliable @tappanch:

    First, all my admiration for your tireless and invaluable work: the faithful accountant of uncharted Fidesz malfeasance.

    Could I ask you for a few figures you’ve no doubt posted before? If you don’t mind posting them again, they will be extremely useful in the coming weeks and months:

    I understand that the actual Fidesz percentage of the eligible vote was 33% for the 2010 law-making/breaking “supermajority” and 27% for 2014.

    But could you please also post the following (with their sources), for 2010 as well as for 2014:

    (1) Percentage of eligible voters that actually voted.

    (2) Percentage of actual votes that went to each party

    The overall facts seem to be that out of a low minority of eligible voters, Fidesz got a plurality (not even a majority, which means over 50%) of the actual vote and gerrymandered that into a 2/3 “majority.”

    (And this, perhaps by way of some extra help in reaching their arbitrarily gerrymandered 2/3 threshold (apart from their control over media and signposts, over legal constraints on campaigning and funding, and buying some impoverished Roma votes) by from liberally enfranchising citizens of surrounding countries who have never paid Hungarian taxes or even set foot in Hungary…)

    Many thanks.

  8. Dear Eva,

    Am I mistaken or is there a typo in the second paragraph? Shouldn’t András Németh should be Horváth?

    Thanks as always for your time and effort.

  9. Well, it is not only NAV but lately the Competition Office too. It’s rumored to be a tool just like the prosecution. Once CO issues a fine for alleged bid rigging or other cartel activities, the money needs to be paid in immediately (regardless of any appeal) and it can broke smaller-sized companies. It’s a great “legal” tool to break competitors and supposedly communist/socialist-leaning entrepreneurs.

    Since gaining 2/3s and thus complete control over the country, one of the more repulsive elements in Fidesz’ modus operandi has been to force entrepreneurs to sell their companies. Just like in Russia.

    Somebody (usually a competitor or a local party man who are known to have great traction within the Fidesz universe) arrives at the company’s doorstep and says he wants to buy your company. Needless to say, the price is usually peanuts.

    If the entrepreneur doesn’t sell, the tax authority (NAV) and somewhat later the prosecution (on the usual charges of mismanagement of funds etc. even if the only shareholder is the potential seller so he would’ve ‘mismanaged’ only his own funds) appear within days and make the life of the owner/company a hell.

    Slowly the company is being smothered. But if the seller changes his mind, there’s a possibility to negotiate a deal. One can’t say Fidesz isn’t open to a compromise.

    Needless to say, the terms are much worse then at first.

  10. There is a very interesting interview with Tamás Mellár in Népszabadság today (http://nol.hu/belfold/a-szazadveg-csak-egy-penzmosoda-1495681). Mellár was a Fidesz supporter in the past and head of the Office of Statistics. He worked at Századvég but left, and says now that it is nothing more than a money laundering operation, in which the ministries order basically meaningless studies, send the money which Orbán’s advisers pick up. It is as plain as pike staff that this is what has been going on but good to hear it from someone who at one point, was an Orbán supporter.

    It also lends credence to the speculation that the head of Századvég was one of the banned, because the rumour was that the American company was expected to pay for “advice” from a company in return from favours from the tax authority. And Századvég fits the bill.

  11. Dear Tappanch please provide figures what tiny minority of the total population voted for Obama, Merkel and Cameron. We can feel the dictatorial urges of these people when you prove with your relentless numbers the American malfeasance(!). For example, how could they turn a tiny minority of support from the people into having 100% of the presidency? Dear Tappanch could it be right that the population of the USA is 318 million and only about 60 something million support Obama? How can such a travesty happen that he is elected president while not even having a majority, 50% of the population? Please watch out for the same numbers regrading the upcoming November midterm elections. When the democrat party suffers a catastrophic defeat in a few days, can we still call the US a democracy if they continue to govern?

    How can we ignore the fact that 250 million Americans did not vote for Obama? Is it also true that they do not have a representative election system? When Mitt Romney gets 1 less votes what happens to his tens of millions of votes? Are they lost forever? If they are lost forever, how do you call that democracy? Why is the USA allowed to have such dictatorial election system, where the winner takes all and the loser loses all?

    In Hungary the LMP party with 5% is able to delegate 5 representatives in parliament. If in the USA a party gets 5% nationally, how many seats is it able to win in the US assembly? Is it more than 0?

  12. Did André Goodfriend lie a hundred times during the past few weeks? Every time he said that American laws prohibit the USA from sharing information about the travel ban, but a website, index.hu writes that this was a lie: http://index.hu/belfold/2014/10/31/kitiltas_botrany_budapest_washington_ina_diplomacia/

    In their article Index writes that USA laws allow the sharing of information and nothing prohibits this. In addition the US embassy in the past shared information that it didn’t have to according to law. It only wants to apply pressure is the final conclusion of the article.

  13. Self-congratulation.
    .
    Nepszava, October 29, 7:45 PM:

    Vida, head of the Hungarian IRS must be in Tenerife with her possible VAT-fraud conspirator.
    http://nepszava.hu/cikk/1037842-vida-szabadon-nyaralgat

    “tappanch”, October 23, 2014 at 12:30 pm

    “Where did they go at 4 AM? I checked the departures at Schwechat yesterday morning.
    The first planes left at 6 AM. They either changed planes in Germany, or went to Tenerife.”

  14. The Mafia Regime doesn’t do “public consultation”:

    “A ‘large public consultation’ (whatever that means) is to be held on the subject… mid-January.”

    What The Dear Leader means is that he will make a decision, there will be a few questionaires sent round to pro-regime loyalists with such open questions as:

    “Don’t you agree that there is too much child pornography on the internet?”

    “Don’t you agree there is too much liberal opinion expressed on the internet?”

    “Don’t you believe the internet can be a dangerous tool in wrong hands?”

    “Don’t you agree that the internet providers make too large profits?”

    “Don’t you agree that the State should be able to help the OAPs and the sick with the money recovered from the evil Internet providers?”

    Once the “answers” are in, then the regime will tax the internet.

    “Victory” demonstration tonight?
    I will wait until Orban and the rest of his corrupt thugs are safely removed from power (and preferably the country) before celebrating.

  15. @bristol

    “tappanch” October 17, 2014 at 6:10 pm

    Mr Peter “Incredulous” Szijjarto should inquire Senators Mikulski & Shelby and Members of Congress Rogers & Lowey about the “credible evidence” in 3 months:

    “Not later than 90 days after enactment of this Act and 180 days thereafter, the Secretary of State shall report in writing, in classified form if necessary, to the Committees on Appropriations describing the evidence of corruption concerning each of the individuals listed”

  16. Oops, let me correct myself. This means that the Department of State has 6 months to send the evidence to Congress. So Mr Szijjarto can ask for it around the March or April.

  17. “A ‘large public consultation’ (whatever that means) is to be held on the subject… mid-January.”

    It means that the internet tax will be debated for at least a year, and voted on only around 2015 November if at all. I wonder what the conspiracy theorist think about why was the tax withdrawn? According to the loons it can’t possibly be that democratic show of opinion such as protests had anything to do with it correct? It must be some dark secret other than listening to what the people want.

  18. D7 Democrat:

    The consultation will be done via sending out 10 million letters via Magyar Posta at triple the normal rates (aka. state subsidy and theft). Fidesz never misses the opportunity to steal if one can find a half-plausible legal basis.

    I agree, this ‘backtracking’ sounds to me like the mayor of Kecel Mr. Haszilló, who said he was gonna resign after advocating the shooting down of liberals, jews and gipsies. The media carried the news that he was sacked, Fidesz fired him etc. Now that the media thunder is over, he stays put and of course won’t resign, why would he?

  19. Orban, as quoted in the Fidesz-friendly
    http://mno.hu/belfold/orban-viktor-igy-nem-lesz-internetado-1256057

    “There will not be internet tax THIS WAY.”
    This measure “must be withdrawn and MODIFIED”
    “There will be national consultation about the issue in mid-January”

    Other sayings of our great leader today:

    “There is zero tolerance for corruption in Hungary.
    If somebody has evidence, s/he should hand it over to the state authorities.
    This law should be obligatory even for the Americans, but they fail to observe it”

    “We just learned that American companies are also involved in VAT fraud, but we still
    do not know depth of the involvement, and on which side they stand.”

  20. 1:39:46
    “I learned in Brussels last week that our debt is higher than anybody would have thought”

  21. Orban changes his mind about the immediate introduction of the internet tax
    in the live broadcast at 1:46 exactly !!

  22. The supposed cancellation of the internet tax is only the usual “peacock dance”.

    Don’t be fooled.

    In a couple of months the latest, Fidesz will introduce another utility tax or something similar, which will result in a similar increase in the internet prices that what the internet tax would have. The internet service providers make “huge extra-profits” according to Orban, which is a simple and blatant lie but which statement implies that he will move against the sector, only not in this form. Maybe in mid-July, when people are on holiday and don’t care about politics.

    I actually think celebration is in order, because if Orban introduces sneakily something similar regardless of his statement (which can be interpreted by average joes as a cancellation), the outrage could be bigger than was on Tuesday.

  23. “I learned in Brussels last week that our debt is higher than anybody would have thought”

    Our Dear Leader is saying it was only from the EU that he learnt how big his regime’s debt is?
    Are you sure that is the translation?
    He’s effectively blaming his poodles for hiding the statistics from him?

  24. The Statistical Office is still full of post-communists. My cousin works there and she tells me so. Try as he might, Orban couldn’t get rid of them. He is being fed with bad numbers about national debt.

    Orban wants good, but the bureaucracy is being sabotaged by leftist traitors.

    I hope Janos Lazar with the help of the national security apparatus succeeds in flushing out these communists.

    Until that happens Orban’s hands are tied.

  25. @Mrs Nemeth:

    That was a really funny joke!

    Orbán had 25 years to get rid of the communists – but Fidesz never opened the archives from Kadar times, ain’t that strange?

    You stupid lying trolls never cease to amaze – btw it’s Halloween today, are you going out tonight as a communist?

    PS;

    Have you ever tried to count the number of former MSZP members and ex-secret policemen in Fidesz?

  26. @Gezane Nemeth – you “hope Janos Lazar with the help of the national security apparatus succeeds in flushing out these communists.”??
    Where is lustration? (átvilágítás). Janos Lazar promised it. With a 2/3 majority, why hasn’t Fidesz passed it?
    If communists are undermining Orban’s policies, why has Orban made Laszlo Tasnadi, a former officer of Kadar’s secret police, State Secretary in the Ministry of Interior?
    http://index.hu/video/2014/06/23/harom_per_kettes_allamtitkar/
    Mrs. Nemeth, wake up!

  27. @Gezane Nemeth

    Are you comedian Hofi reincarnated? 🙂

    Usually governments replace the head of the Statistical Office.
    Orban replaced the deputies as well.

    Do you think it is the decision of a low-level employee to hide more and more
    numbers from the public, or to alter the numbers?

    Here are some numbers I would love the Statistical Office to reveal:

    Employment statistics:
    1. # of employees working abroad that are now included in the “employed” column.
    2. the number of people employed full-time inside Hungary who are not “fostered workers”,
    their change since 2010.

    Debt:
    1. Monthly number about the NET debt of the Hungarian government.
    2. Its breakdown into Hungarian and foreign currency.

    Population:
    1. The number of residents of Hungary that are eligible to vote.
    What happened with those 80,000-120,000 who “moved” to Hungary
    in January – February 2014 and voted in the April election?

    Thank you.

  28. Now that Tamas Meller openly called Szazadveg Gazdasagkutató Zrt. where he was the head of research a money laundering outfit and Peter Heim is on the US no-travel list, I wonder what Gabor Török, the co-founder of said institution (the other being Mr. Heim) has to say about his involvement in this rather interesting operation.

    Of course we knew Mr. Török received millions from sponsorship by Fidesz-loyal construction companies, which as it is market practice have a predeliction to advertize on political blogs but perhaps his involvement with Fidesz was deeper than we previously thought.

  29. Now that Tamás Meller openly called Szazadveg Gazdasagkutató Zrt. where he was the head of research a money laundering outfit and Peter Heim is on the US no-travel list, I wonder what Gabor Török, the co-founder of said institution (the other being Mr. Heim) has to say about his involvement in this rather interesting operation. Of course we knew Mr. Török received millions from sponsorship by Fidesz-loyal construction companies, which as it is market practice have a predeliction to advertize on political blogs but perhaps his involvement with Fidesz was deeper than we previously thought.

  30. @bungled

    So then Bunge went to the State Department and falsely accused Hungarian government officials about corruption? And look what happened the day after their visa was revoked? The key official hastily left the country. Seriously? You don’t think anybody believes this, do ya?

    Yesterday that little ass-plug, Arpad Habony, turned up at the Lincoln Memorial for a photo op to prove he is not on the list of people banned from the US. Maybe so, but they are only booted as private citizens. He could have came on government business. This is the guy, who beat up an elder couple at broad daylight when they stepped in front of his Lexus. He is Orban’s chief advisor (ie wet work specialist). He reminds of Peter Dinklage from the GOT …

    The “nicht ugri-bugri” is from Gyorgy Moldova. It’s a quote from a truck driver who tried to explain to a doctor in Austria what kind of insects he aquired for a truck stop hooker: “nicht ugri-bugri, aber langsam spazieren …”

  31. February 2014:
    Orban to the Jews [MaZsiHiSz] – We will continue the dialog after Easter (about the Nazi eagle memorial)

    [there was no dialog after the election, he just had the memorial erected]

    October 2014:
    Orban to the youth [protesters] – We will continue the dialog after Christmas

  32. @Tappanch – and just before saying “nix ugri-bugri” Orban assured the listeners that if Russia should turn off the gas, there is already so much gas stored up that the government will be able to sell some to Serbia. That is, Orban stopped sales to Ukraine because Hungary needs fuel, but he’s preparing to sell gas to Russia’s greatest supporter in the region – or should I say second greatest supporter?

  33. Gezane Nemeth

    “He is being fed with bad numbers about national debt.”

    Phew, that is a relief.
    He must have forgotten about the statistics office because every other govt office in Hungary is sure as hell staffed 100% by pro-regime loyalists.

    I hope Mr Orban is able to convince Brussels of that fact.

    Then we will all sleep easier at night; the 100,000s of economic refugees can return home and all those small companies forced out of business in the last 4 years can reopen.
    Prophet Matolcsy may even win next year’s Nobel Economics prize when the true facts come to light

  34. muttdamon: “You don’t understand Nemethne. Those are communists who disguised themselves as Fidesz supporters. One cannot be vigilant enough …”

    And you know what you those people say, right?

    “We are not Communists”

    (sound familiar?)

  35. It is an utter shame. Shame that we hungarians have remained at home for years, letting this maffia government get out of control, robbing us citizens with every impossible tax means you can think of, while at the same time scrounger state officials were stuffing their pockets with billions of OUR taxpayers money. And I havent’t even talked about their antidemocratic laws they had enforced. It is WORSE than Argentina. A few centuries ago these people were shot (as it is done in present day China, but that’s a different matter) All hungarians should go to the streets and should force this corrupt government to resign. This is the best thing that should/could happen to these corrupt officials unless tensions get out of control. If we don’t act soon, we can undoubtably end up in a Ukraine style political hand over situation where there was no political hand over. I don’t think many hungarians would want to see their fellow citizens spill their blood for the cause. This maffia government will not back down so it needs to be forced out as soon as possible.

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