The National Pálinka Council (PNT) says the black market in home-distilled pálinka and the spread of illegally operated distillery services are killing the pálinka market by creating invisible competition, aided by the government loosening home distillery regulations while keeping legal and professional rules strict.
The council says the government should draw clear boundaries between pálinka and home-distilled spirits for personal use in order to keep the pálinka business in Hungary afloat.
While the restoration of pre-2010 conditions is impossible, according to the council, the business would be saved if the government faced up to the existence of the black market and kept distilling for personal use within legal boundaries. The PNT argues that the current regulations make illegal pálinka sales possible by allowing private distillers to produce a much higher quantity of spirits than what consumers need.
The PNT argues that after a successful period between 2000 and 2010, the situation started to change, worsening especially after 2015, when changes in the regulations made it impossible for the pálinka industry to explore the extent of illegal and invisible competition. Ever since, legal sales of pálinka are stagnating, while the number of registered distillery services (where people bring fruit to be made into pálinka by a third-party distiller) has fallen; all the while, alcohol consumption in Hungary is constantly growing.
The control of private distilleries is the responsibility of municipalities, and the PNT says there is no realistic data available about pálinka produced for personal consumption. The extent of illegal distilling can only be measured by extrapolating from data available from investigations of the National Tax and Customs Administration (NAV).
The last time NAV seized equipment was in March, in Veszprém County, according to the press release. Authorities seized three private distilling machines, 450 liters of alcoholic products, and more than 2,500 liters of mash waiting for distillation.
It would take five years for a private distiller (in the case of 50% alcohol content) to create this amount of pálinka, paying HUF 300,000 of taxes. For the same amount of pálinka, a commercial distillery would have to pay HUF 1.5 million, says the PNT.
Additionally, tax-stamped, commercial pálinka is classified as a "food product not useful for peopleʼs health" from 2019. The council says the government is aiming to make privately distilled pálinka tax-free, ignoring the existence of the black market and endangering the industry. The PNT argues that overregulation of non-private distillers is making their operations impossible.
The council says it is ready to cooperate with the relevant ministries and offer solutions that may save the pálinka industry.