Whistleblower accuses government of emasculating Hungary’s tax authority (NAV)

March 28, 2014

Former Tax Authority employee turned whistleblower Andras Horvath (left), and new Tax Authority whistleblower Istvan Vancsura (right)
Former Tax Authority employee turned whistleblower Andras Horvath (left), and new Tax Authority whistleblower Istvan Vancsura (right)

Dr. Istvan Vancsura, a former department head at Hungary’s National Tax and Duty Authority (NAV), held a press conference yesterday regarding the refusal of top management to address serious tax evasion issues, resulting in his departure the summer of 2011 following the dismantling of his Special Affairs Department.

Vancsura’s claims corroborate those of former tax inspector turned whistleblower, Andras Horvath, who is being investigated for crimes allegedly committed when going public with his findings in October 2013.

At the time Horvath alleged NAV’s directors were giving preferential treatment to certain companies and preventing auditors from investigating these companies, at an annual cost to Hungarian taxpayers of some HUF 1.7 trillion, mainly in the form of illegally reclaimed value-added tax (VAT).

Dr. Vancsura claims that as the head of the Special Affairs Department he witnessed the systematic dismantling of the internal procedures and organizational structure of an auditing system he claims was well-suited to combat complex tax fraud schemes employed by criminal networks.

Dr. Vancsura accuses NAV director Katalin Somos, the deputy director Melinda Rakosa, and Risk Assessment Department manager, Mrs. Laszlo Kedves, of complicity. Vancsura says he made recommendations to NAV Vice President, Mrs. Dezso Csillag, but received no response.  Vancsura claims he even turned to the Ministry of the National Economy, but to no avail.

The former department head claims to possess documents proving that both the Ministry of the National Economy and the Tax Authority’s leadership neglected to address his concerns.

Video of the press conference, courtesy of Atlatszo.hu (transcript below)

Újabb volt NAV-os vádolja az adóhivatalt from atlatszo.hu on Vimeo.

Istvan Vancsura:

HUF 2,000 billion is the amount of sales tax that is being syphoned out by a network of criminal organizations utilizing mafia-like tactics of tax evasion which are harming the national budget. Our organization was founded in 2007 to step up against these tax-cheats. . . . I was the department head for the Rapid Response Division. Our job would have been to assist the administrative supervision of such cases by providing operational support for the tax auditors. Our division was unlawfully beaten to pieces. Unfortunately, leadership at the tax authority played a complicit role in this by reassigning our best professional leaders to different cases. . . . [Our division] was officially dismantled on 1 January 2013 due to a government order.

Katalin Somos, Melinda Rakosa, and Mrs. Laszlo Kedves were the ones responsible for acting outside their position’s duties and against reason.  They systemically weakened our division to a point at which they made it possible for the government to craft legislation disbanding our division. Currently, these people are still working in the same capacity at the tax authority. . . .

Our dossier is a blue dossier. This dossier was on the desk of the Mrs. Dezso Csillag – who also chose to not deal with these issues. . . .

I had written to the Chief of the Tax Authority and asked her to begin investigating these matters. She chose not to investigate. . . .

I was forced to seek assistance outside the Tax Authority and I brought these issues to the attention of the Ministry of the National Economy. The first written response I received from the Ministry of the National Economy was that ‘the Minister cannot give instructions to the chief of the Tax Authority.’

The minister’s job description states that the minister has the right to become involved in matters concerning the tax authority. Therefore, in certain cases the minister does have the right to instruct the chief of the tax authority to investigate these matters further. . . .

After receiving no response from the State Secretary, I contacted her by phone. In short, she told me that she does not wish to bring justice to this issue.

Andras Horvath:

Mr. Vancsura gave this information and supporting documentation to top management at the tax authority at the beginning of 2011. Not long after that, he gave the same information to the Ministry of the National Economy. By the end of 2011 he had delivered this information to top political figures. He had approached everyone. Anyone who was in a position to make a decision in this matter, be they professionals, public administrators, of political leaders. All did absolutely nothing. There were no disciplinary actions taken and no investigation was launched.

Istvan Vancsura:

There are laws and regulations with which the volume and scope of this kind of fraud can be minimized. The fact that these issues do make it to the political level, and because legislators are unwilling to deal with these issues and problems, is an enormous problem. We can see that the parliamentary oversight committees were closed by Fidesz, they didn’t allow them to convene, and therefore these issues had no chance to make it on the parliament’s agenda.

Gabor Vago, LMP parliamentarian:

As long as Fidesz controls the prosecutors and the investigation, the Hungarian taxpayers will continue to lose hundreds of billions of forints every month.

Istvan Vancsura:

The majority of these issues need to be addressed in parliament, not by the prosecutors.

Gabor Vago, LMP parliamentarian:

I have submitted a written inquiry asking Peter Hold whether the prosecution is investigating the issues brought up today in manner recognizing allegations which amount to an official abuse of power.

Andras Horvath:

No one has been held responsible, and no investigation has been conducted within the Tax Authority. I ask again: what else needs to happen in order for this to be changed?

Gabor Vago, LMP parliamentarian:

It is unacceptable that while the government is pointing at prosecutors, the prosecutors have assigned only one person to this case. Years won’t be enough for one person to uncover anything in this case.

Istvan Vancsura:

The chief administrator of the Tax Authority must be independent of any political influence. This is a professional organization.

Referenced in this article:

Újabb volt NAV-os vádolja az adóhivatalt, Atlatszo.hu; 27 March 2014.