Yesterday the European Commission rejected Hungary’s request yet again to introduce reverse VAT in the sugar trade. This is the second time the EC has rejected such a request by Hungary. There exists a legal EU framework called “Quick Reaction Mechanism” which would allow member states to introduce emergency measures when they are faced with a serious case of sudden and massive VAT fraud.
Among others, the left-liberal newsportal Index.hu also drew attention to a massive VAT fraud in Hungary which has been going on with the participation of Slovak companies. Statistics show that at least ten billion Forints of VAT are cheated this way each year.
Hungary’s government introduced the practice of obliging the buyer, that is not the seller, of goods to pay VAT for grain in 2012, a retail sector where one could also see massive tax evasion. Data from the National Tax and Customs Authority shows that the change has sharply reduced this kind of tax fraud.
Most of the profit from the sugar VAT tax fraud is pocketed by multinational supermarket chains like Tesco or Lidl. This sounds like a pretty good explanation to me for Brussels’ decision.