WWW.BBJ.HU
4 Focus: Energy
Budapest Business Journal | Nov 29 – Dec 12
GOV’T TO REOPEN RETROFITTING SUBSIDY SCHEME
GERGŐ RÁCZ
A number of applications that were submitted to a European Union financing program may now finally become reality years later after the government announced it has successfully gathered sufficient state funding to allow the program to progress. “We raised the necessary funding, step− by−step or should I say forint−by−forint,” Development Minister Zsuzsa Németh told reporters in Győr. The official said that the campaign dubbed ‘Panel II’ will be sufficient to perform the necessary retrofitting of some 8,000 homes, many of which have had applications suck in the system since the suspension of the program in 2009 when state funding ran out. At the time, there was heightened interest for the program that allowed major and often long overdue overhauls of residential buildings, including the installation of better sealed doors and windows and more advanced types of insulation. Such measures are known to drastically reduce households’ energy consumption and thus have a significant overall impact on the environment, given that buildings produce the largest volumes of harmful carbon dioxide emissions. Németh said the ministry calculates that the resulting developments will reduce the apartments’ annual carbon dioxide emissions by 8,700 tons and their energy consumption by 41 million kilowatt hours. GREEN BUILDING JOBS
The continuation of the program is expected to generate HUF 9 billion in new orders for the construction industry, one of the eco− nomic segments most painfully affected by the crisis, and showing some signs of bounc− ing back only now.Builders had a tough year in 2012, with the Central Statistics Office (KSH) publishing negative growth for the industry in 10 out of the 12 months, with February dipping 15.1% on the year. In con− trast, 2013 has been all about growth thus far, with every month producing expansion. The latest figure (for September) shows a 9.3% annual growth, while the biggest leap of 14.6% came in August. The announcement reflects the govern− ment’s declared intent to support the con− struction industry, not only through state projects or subsidizing household initia− tives, but also through creating new financ− ing channels that could fuel private invest−
EXPERT OPINION
ANTI-VAT FRAUD MEASURES FOR THE ENERGY SECTOR The EU has launched stricter rules to tackle VAT fraud in gas and power trading, introducing Quick Reaction Mechanism and extending the scope of reverse taxation.
STORY HIGHLIGHTS ■
New funding has been allocated for subsidy program suspended in 2009 ■ Gov’t expects residential modernization to boost construction industry
Márton Hajnal
F
ATTORNEY-AT-LAW Gide Loyrette Nouel − d’Ornano Iroda
raud schemes evolve rapidly, ment.The construction industry still greatly giving rise to situations that needs the inflow of new funding; despite the growth this year, the percentages compare require a rapid response; the to a deplorable 2012 base and the industry largest VAT fraud in the EU is is nowhere near the boom seen before the the so-called missing trader intra-comLehman Brothers collapse, when financ− munity fraud, more commonly known as ing was still widely available and invest− ‘carousel fraud’, where supplies are rapments were plentiful both for households idly traded several times without the payand businesses. The association for promot− ing home construction (TLE) is urging new ment of VAT. subsidy schemes and argues that the gov− Combating VAT fraud is a topic of ernment should use funding from the Euro− extreme importance within the EU, as pean Investment Bank or the National Bank fraudulent activities – mainly of the above of Hungary to open funding options with type – are growing at an alarming rate, the specific purpose of covering the costs
Development Minister Zsuzsa Németh
of energy optimization. Theses wouldn’t be subsidies, but made available with favorable Internet conditions for long maturities. TLE also argues that Hungary should con− sider the sustainability of the overall stock of apartments. KSH says there were 10,560 new apartments built last year, meaning there are altogether 4.3 million of them in the country. The president of TLE, Zsolt Maráczi, cal− culates that if there were around 10,000 new apartments built every year, the current over− all stock would take 300−400 years to be fully replaced. It notes that there is no state con− cept that covers a multi−generational time span like that and especially not a strategy that would assure sustainability. There is currently a large number of build− ings throughout Hungary that are outdated, dilapidated and barely meet the legal crite− ria for functioning as homes. In such cases, the construction of new, sustainable housing would actually be a more cost−effective solu− tion then retrofitting, Maráczi warned.
both in terms of the quantity, and the industries affected. In order to fight more effectively against VAT fraud, the European Council approved the Council Directives 2013/42/EU on the quick reaction mechanism and 2013/43/ EU on the optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud. The introduction of the new measures was welcomed by many parties active on the European electricity and gas market, including regulators, exchanges, brokers, clearing houses, transmission system operators, energy trading firms, utilities and guarantee of origin issuing bodies. The directives introduce two major legislative changes; one provides the possibility for member states to introduce the reverse charge mechanism (where the recipient of a supply is obliged to account for the VAT) to a series of specified goods, including electricity and gas, at national level. The second major legislative change creates a so-called ‘quick reaction mechanism’ that enables the European Commission to grant member states special derogations in case of major fraud attacks.
QUICK REACTION MECHANISM The aim of the quick reaction mechanism is that a member state facing severe abuses in any sector of its economy can initiate the reverse taxation mechanism concerning the given economic sector in the frame of an accelerated procedure, as recent experience has demonstrated that the previously available procedure was not able to respond quickly enough to requests by member states for urgent measures. As per the Directive, the requests of a member
state – in such cases the country concerned must provide the Commission with all the necessary information – shall be approved or rejected by the Commission within one month. The new practice of applying a reverse charge is expected to stop VAT fraud in the energy sector, however, since the quick reaction mechanism can only be a temporary fix pending longer-term legislative solutions with a view to making the VAT system more resilient to fraud, it should only apply for a maximum of nine months. SCOPE OF REVERSE TAXATION TO BE EXTENDED Besides the initiation of the above quick reaction mechanism procedure, the Directives extend the list of products and services regarding which reverse taxation can be initiated, for a period of a minimum of two years. Such transactions, beyond the sale of gas and electricity to resellers, include the sale of mobile phones, integrated circuit devices, videogame consoles, tablets, laptops, cereals and industrial plants (including oil seeds and sugar beet), raw or semi-manufactured metals, and telecommunication services. Nevertheless, member states can apply a reverse charge only in cases where the usual measures against VAT fraud are not effective enough. In extending the scope of reverse taxation, the long-term aim of the European Union is not to make reverse taxation generally accepted but to provide a temporary solution for the period during which the Commission sets out measures to make the VAT system more resistant. The above measures, therefore, are to be used only in reasonable cases and during a limited period, until the end of 2018, to repel VAT fraud. The Directorate-General for Taxation and Customs Union and the Council put forward the present legislation, which will, most probably lead to the list of transactions falling under reverse taxation in Hungary being broadened, including transactions in the gas and electricity sector.
www.gide.com
NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY
The government has announced the re−launch of a suspended retrofitting program that is expected to optimize energy use for 140 communities that have filed for support. There are hopes that besides the environmental aspects, the grants will also serve as a boost to output in the construction sector.
19