Distillers of pálinka, a fruit distillate that is Hungaryʼs national eau de vie, have urged the government to cut the VAT rate for the spirit to 5% from 27% to counter the impact of the public health product tax, state news wire MTI reports.
Hungarian lawmakers ended an exemption for pálinka from the public health product tax, which is applied to other alcoholic drinks and unhealthy foods, from January 1, 2019, after the European Commission stepped up an infringement procedure against the country on the matter.
The EC argued that the exemption was protectionist because such products are mostly distilled domestically.
In a statement issued on Wednesday, the Hungarian Pálinka Order pressed for a reduction in the VAT rate on pálinka to counterbalance the 60% drop in commercial sales of the spirit as the public health product tax fed into prices.
Attila Barabás, the orderʼs grand master and the CEO of distiller Győri Likőrgyár, said the application of the tax to pálinka had raised prices by HUF 500-1,000 for every half-liter bottle of the spirit.
Sales of pálinka dropped to 1.12 million half-liter bottles last year from 5.6 million in 2018, he added.