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EC nixes second reverse-VAT call for sugar sector

Banking

The European Commission has rejected a request by Hungary to introduce reverse VAT in the sugar sector, the National Economy Minister Mihály Varga informed national news service MTI. 

The EC earlier this year rejected a request by Hungary to implement the introduction of reverse VAT in the sugar sector in the framework of a “Quick Reaction Mechanism,” reserved for instances that require emergency measures when member states are faced with a serious case of sudden and massive VAT fraud.

Hungary’s government introduced the practice of obliging the buyer, not the seller, of goods to pay VAT for grain with the aim of reducing tax evasion in 2012. Despite data from the National Tax and Customs Authority showing a subsequent reduction in VAT fraud, Magyar Cukor Zrt deputy CEO László Hajós nevertheless alleged in January of this year that some 80% to 90% of the sugar sold in Hungary is distributed while avoiding VAT payment.

At that time, Hajós noted that although about HUF 5 billion worth of tax fraud cases connected to sugar distribution had been exposed in the previous two years, the actual extent of the phenomenon is far broader.

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