Tax Cut on Pig Meat in Hungary to Close Legal Loopholes

HUNGARY - With effect from 1 January, the value added tax (VAT) on live pigs and half carcasses has been reduced from 27 per cent to five per cent.
calendar icon 7 January 2014
clock icon 3 minute read

Agriculture Minister Sándor Fazekas announced on 20 November 2013 that the government will lower the VAT on live pigs and half carcasses from 27 per cent to five per cent as of 1 January 2014, reports Budapest Business Journal (BBJ).

According to the minister, the aim is a partial whitening of the meat market.

BBJ asked Tamás Éder, corporate relations director at Sándor Csányi's Bonafarm Holding (which includes meat manufacturers Herz and Pick), to comment on the news.

Mr Csányi said that the 22 per cent VAT decrease has no effect on the final product - namely meat and processed meat - as the VAT of those products will stay at the very high 27 per cent level.

He told BBJ that, as Minister Fazekas said, the purpose of the VAT reduction is the whitening of the meat industry, or at least of the segment which produces unprocessed or half-processed goods. In the case of fast-moving, unbranded consumer goods like unprocessed meat, it is very hard for the authorities to follow the route of the goods. In addition, saving 27 per cent on VAT is a significant gain indeed. These two factors expressly attract those greedy wranglers who wish cheat on VAT.

The situation is similar for other food products, he said.

Asked why the current government proposal only covered pork, Mr Csányi explained that recently, several notable meat processors have come close to bankruptcy in Hungary. It was crucially important for municipal governments to save workplaces in those cities and towns, so the meat processing companies in question have essentially been nationalised.

This is what happened in Pápa, Gyula and Kaposvár, the latter town being the headquarters of the well-known Kométa brand, he told BBJ. Now the government is faced with the problem that it is impossible to run these companies profitably in the existing conditions.

Minister Fazekas suggested that the present measure may be the first step of a process to be applied to other foodstuffs as well.

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