Let me try and explain why I believe that a tax that brought in HUF94.1bn last year and is set to bring in more than HUF100bn this year is a mistake.

Until eva arrived, VAT was closed. Disregarding exports, buyers only reclaimed VAT that sellers had already paid to the treasury. This changed with eva: taxpayers using the system did not pay the VAT on their bills, but the invoicees could nonetheless claim it back. Last year, this sum reached HUF105bn. For years, VAT was the most predictable form of tax, since, setting fraud aside, tax could only be reclaimed using an invoice, so buyers had an interest in using an above-board invoice, even if sellers did not.

But eva punched a whole in this closed system, and VAT is flowing out of it all the time. Eva taxpayers cannot reclaim VAT, so they do not need an invoice either. This does not mean there is no record at all of the HUF500bn they spend each year, since they have no choice in Tesco or Cora, or when paying their utility bills. Nonetheless, it is an open secret that formal invoicing is frequently omitted, mostly after the seller has politely asked: "Would you like an invoice?" This effect is cumulative, since the hotel-keeper, plumber, stonemason or decorator who does not write an invoice may well not ask for an invoice himself: the loss in VAT revenues grows with the velocity of circulation of money.

Eva also created new ways of 'dealing with' the high cost of paying wages. An employee taking home net income of HUF1m each month costs his company HUF2.4m each time. BUt if his friend is prepared to write an invoice for HUF1.2m each month, and pays HUF180,000 in eva on that, then the remaining HUF1m can go straight into the employee's pocket. This leads a HUF1.4m whole in the state budget. This is hardly a complicated trick, and it is widely used in small and medium-sized companies. In some areas it is becoming a mass phenomenon. Of course, this piles up further, since there is no need to ask for an invoice when spending that HUF1m.

We should not tar everyone with the same brush. Many people use eva honestly, and in consequence are spared administrative burdens and can sleep easily at night, knowing their taxes are paid.

But abuses are widespread. The taxman can use all the means at his disposal to fight abuses, but this is difficult if the abuses have become so widespread. It is impossible to vet every transaction.

There is no way of precisely calculating the losses that are being incurred. Losses of VAT revenue can be calculated fairly accurately, but there is no way of establishing the sums lost in wage and social security contributions. Nonetheless, the figures could be as high as HUF400-500bn each year.

The author is a retired economist.