A recent study in Hungary has found that the rising levels of VAT fraud throughout the country are crippling the Hungarian food industry, with around half of the VAT payable on meat products being lost to fraud.
The Ernst & Young study was commissioned by the Forum for the VAT Reduction of Basic Food Products, which argued that fraud had reached huge proportions and was undermining the competitiveness of Hungarian food producers and processors, and causing investors to move to neighbouring countries.
VAT in Hungary, at 27%, is currently Europe’s highest rate, which the Forum argues “offers rich pickings for fraudsters”. It has called on the government to lower the VAT rate on basic foods to below 10%, commissioning the Ernst & Young report to look at the fiscal impact of reducing the VAT rate for various basic food product categories.
Tamás Torba, spokesperson for the Forum, said: “The total VAT income arising from the meat industry is HUF47.452m, with lost VAT in the sector – unpaid due to fraudulent trading, cash trading without invoices or other forms of fraud – is HUF22.238m.”
Torba pointed out that these statistics do not include poultry meat, for which an estimated HUF11.862m lies uncollected, (compared to HUF38.113m paid). The Ernst & Young report put conservative estimates on basic food fraud at HUF128bn, but the Forum says the total estimated fraud on all foodstuffs is thought to be around HUF300bn.
The rise of black marketeering and food fraud is exacerbating problems for the meat industry, which is already suffering from rising prices and falling demand.
Torba said: “Meat consumption in Hungary has fallen steadily over the last decade, primarily as a result of economic circumstances, as the majority of the population cannot afford it, and there are also some changes in the consumption trends, with a tendency to eat less red meat. The same goes for the number of meat-producing animals, especially pigs, where Hungary has less then half the amount it had 20 years ago.”
