Hungary’s central budget loses 130 billion forints (EUR 460m) a year due to fraud involving VAT on food, daily Magyar Nemzet said on Monday.
Citing a report by Ernst and Young, the paper said that about one quarter of the tax revenue expected from the sector is not collected due to fraud connected with the trade of vegetable, fruit, meat and poultry, vegetable oil, coffee, dairy and mill products.
A typical way of evading VAT payments is to purchase goods destined to be sold to another EU country, in which case the purchaser is not obliged to pay VAT. The products, however, are re-sold within the country. The other way is to import goods from other EU members without paying import VAT, and sell the products on to retailers via intermediary firms, adding VAT for each transaction and pocketing the difference.
The paper also noted that the cost of transactions was relatively high and if the VAT rate, currently set at 27 percent – the highest in the EU – were to be cut to about 10 percent it would no longer be profitable for evaders to use those two methods. Alternatively, auditors have suggested introducing reverse VAT, in which the customer at the end of the chain pays VAT to the central budget instead of the seller.