Some HUF 130 billion (EUR 456.64 million) in tax revenue is missed every year owing to large-scale evasion in the food retail industry, according to a study released by Ernst and Young on Monday.
“Fake exporting”, whereby products are reported as exported while remaining in Hungary and being resold here, is the most common method of evading tax, Ernst and Young tax expert Tamás Vékási said.
VAT does not have to be paid in Hungary on products exported within the EU, and withholding a product in Hungary means VAT can be reclaimed on it once it has been returned to the shops via several intermediaries, Vékási explained.
Fruit, vegetables, meat and poultry products, vegetable oil, coffee, sugar, milk and flour products are among the most targeted by the scam.
Bogus VAT refund claims
Fraudsters also claim VAT refunds on goods they have imported without paying the VAT, Vékási said. They often use these methods in combination.
Earlier this month a feasibility study by poultry, milk, livestock and meat product councils argued that a reduce VAT rate of five per cent on basic foodstuffs would decrease trading on the black market, boost local production, reduce imports, preserve jobs, and lower inflation.
The current rate for basic foods is 18 per cent. The government is considering the proposal, which the study says would cost the state HUF 60.5 billion (EUR 213.51 million) annually, or 0.2 per cent of GDP.
Best before: 2004… or 2007
The National Food Chain Safety Office (NÉBIH) seized and and destroyed tonnes of suspect food from an East Asian trader in Budapest over the past few days, state news agency MTI reported.
Many products had expired in 2004 or 2007. Inspectors ordered the destruction of 450 kilograms of food and stopped the sale of another five tonnes the previous Friday. Then on Monday another 25-35 tonnes of suspect food were found. The importer faces millions of forints in fines.