Government mulling further VAT reductions in 2018

Following the VAT rate reduction on poultry, eggs and fresh milk, the Hungarian government is making preparations to reduce VAT on sour cream, “túró” (similar to cottage cheese) and pork offal, daily Magyar Idők reported today.  

The new legislation on the reduction could come into effect in 2018, according to online news portal index.hu, although no further details have been published on the process. Two factors are likely to shed light on the direction the government may take.

Firstly, Tibor Mélykuti, president of the Hungarian Milk Product Council, said his organization submitted a package to the Hungarian government in November, in which the VAT rate on “túró” would be dropped from 18% to 5%, index.hu reported.

Secondly, Tamás Éder, president of the Hungarian Meat Industry Federation, told Magyar Idők that while the VAT rate on pork offal stands at 27%, the VAT rate on giblets - the poultry equivalent - falls within the 5% bracket, which can distort the market and may necessitate a reduction to bring the two groups of products into line and avoid action by the European Commission. 

As of January 1, VAT on fresh milk, eggs and poultry was reduced from 27% to 5%, following a similar VAT rate reduction on unprocessed pork meat a few months earlier.

Later today, state secretary István Nagy said at a press conference that VAT rate reductions could affect fish, fruit, vegetables or even bread in future, according to Hungarian news agency MTI.  It is in the governmentʼs interest to see that the VAT cuts have a lasting impact on food prices, which is why the ministry is scrutinizing their effects, he added, according to MTI.