Santa Claus is penalised!

“Well done!” or “Shame on the Tax Authority”?

Tax avoidance, tax evasion, cheating tax in any way and form are among the some subjects that are hunted by each state both through the legislative prescriptions and in actions. The unlawful actions of tax payers result a huge deficit in annual tax revenues, which might strongly effect other areas financed by tax, such as education, health care or paying financial social support for those in needs, having lots of children, etc. When we thinking of tax cheating, we can agree that it is a must to fight against it not only due to the state’s revenue, but even for those who pay their tax properly. But when a given case is in question, it can happen that the moral issues are stronger than the ones of fight against tax fraudulence.

Night of 5 December or morning of 6 December is the part of the year when millions of children all over the world expect a white hair, long white beard old man in red dress to meet, or at least expect the presents he left for them in their boots as they definitely were good boys and girls during the year. This year’s 6 December was not the smartest one for one Santa Claus. Approaching to this lovely event this Santa Claus had advertised his service: he visits children and hands them over the present their parents wish to give them. A mother called him on phone and required his service. That evening after some Xmas songs, the little boy got the present and everyone was happy. Santa Claus got his payment, but before he would have left the flat, he also got a big surprise. The parents who ordered his service were tax inspectors and as this Santa Claus didn’t give any invoice on his service, nor had he got licence to do any business activity, he would be penalised by the tax authority.

The story could even finish here for public, but it didn’t happen in this way. On 7 December after media reported what had happened, the internet has almost “exploded”. Most of the commenters sent their selected “best” wishes to the tax inspectors and the tax authority for this action and proposed them other areas to investigate and fight against defrauders. Hardly any comments agreed and supported the tax authority. It didn’t matter that the action was successful: the inspectors caught a person acting against several laws. The personal feelings were so strong that no one cared about the facts and reasons. Santa Claus soon became a poor victim of circumstances and the tax authority became the “Bad”, the awful and rigour authority who is unable to do what it should do.

First, if we look behind the scenes, we must state that the shadow economy is strong in this country, in Hungary. Lots of companies employ its workers without having a labour contract so that less wages and social contributions must be paid by the employer. Besides many people live under the base necessities or in need independent from the fact whether they have a job (or two) or not. On the top of the previous, there are pretty much small entrepreneurs who set up a business not because they have had a really good idea or product, but to avoid being unemployed. Notwithstanding — among others due to the shadow economy — the legislative prescriptions are stricter and stricter to close the loopholes which also tend people to look for their best for their living, for getting some extra money, if they can; for some, even if it is unlawful. Being a Santa Claus, providing a smart performance for children, for families is also an opportunity for this.

Secondly, if we study the legal prescriptions we can find that providing service such as being a Santa Claus is regarded as business activity: each nowadays’ Santa Claus provides his or her services for profit, for revenue, not as Kris Kringle did in the movie “Miracle on 34th Street”. Business Activity might only be done if tax registration for business purposes is done beforehand and the tax authority issued the tax number for the person or for the company. Also due to the shadow economy it is a must to provide the customer with a receipt or an invoice in case of selling a product or providing service, so that every revenue might be detected, might be taken into account. Considering these rules, the first problem was that this Santa Claus didn’t issue any receipt or invoice for his service to the “parents” featured by the tax inspectors. Then it was revealed that Santa Claus couldn’t even have issued any of them, as he failed the tax registration beforehand. So this became a very easy and simple situation for the tax inspectors that Santa Claus’s activity was against the law and he wanted to earn money without being taxed.

In a country where the national tax authority has fallen under suspicion of corruption and of leaving big tax defrauders to get off in some cases, and in lots of cases tax payers’ rights depends on what experienced tax expert or tax lawyer they can hire for their cases, it is very difficult to say that even tax authority’s action could be reasonable. For those who were shocked by the action of the tax authority, this action meant that a poor person was penalised who wanted to make children smile, sing and be happy this day, it violated this smart tradition only due to a small amount what this guy could earn for his contribution. On the contrary, this action means something very different for the tax authority. It means for it that “Xmast industry” as “short-time per year industry”, which is one of the field of almost undetectable revenues has been investigated. One of this industry’s service provider has failed. But as this industry consists of lots of similar individual or incorporated service providers and product sellers, due to the media the news of tax investigation, the news of earning taxable income by these kinds of services, the news of being penalised if business activity is done in such unlawful way as it is done by this Santa Claus will reach millions of people who might also think that this kind of activity is lawful or think it’s impossible to meet tax inspectors in such events and therefore could be a good field for earning some extra money sharing on it with the state. So this action meant to the tax authority to fight against the shadow economy which erases tax revenues in a similar ratio than one or some larger tax defrauders does.

Last but not least, we can agree with those who propose the tax authority to investigate tax payers who intentionally evade paying tax, or as it is written in Jakarta Post who “suffering from an illness called tax intolerance” (Vittachi). But we mustn’t forget that the approach and attitude of these tax payers that might result less tax revenues and therefore might increase the tax burden of those who pay their tax properly, will never endorse and validate the unlawful actions of tax cheater Santa Claus. On the other hand tax authority’s action against Santa Claus is not unique. A Finnish case reflects it properly that being Santa Claus, providing Santa Claus services are business and not a charity activity. As it was reported in Summer 2015 “the [Finnish] tax administration has forced the company that runs Santa’s Village into bankruptcy proceedings”, as “the company [had] tax liabilities in excess of 200,000 euros” (Newspaper Lapin Kansa). As it is reported “Santa’s Village has 21 employees and its net sales last year were 1.8 million euros” (Newspaper Lapin Kansa), it wasn’t able to compensate the huge loss caused by the significantly declined number of Russian visitors at Christmas time.

In conclusion, we all wish to save the smart events as smart as it is possible. But so that tax authorities might not destroy the awe, the holiness of these traditional events and celebrations by actions like penalize the Santa Claus visiting our children, it is inevitable not to have people who wish to capitalize these events. And if Santa Claus, Easter Bonnies, Cupids of Valentine Day’s and others are to provide their services or sell their products without tax number and without paying tax, they are not better than other tax evaders and they must expect being caught and penalized.

Works Cited
1. Vittachi, Nury „The morality of tax avoidance”; October 07 2012, at web: 
2. FTimes — STT Report Santa Claus faces tax evasion charge”; August 21 2015, at web:
3. MTI/NLCafé — „Itt a vég! Csődbe mentek a finn Mikulások”; August 22 2015 at web:

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