Study Uncovers Massive Tax Evasion In Food Retail In Hungary
- 20 Sep 2012 9:02 AM
Tax dodging in the food retail industry costs the state Ft 130 billion in lost taxes every year, according to a study by Ernst & Young. The most common method of evading taxes is the practice of “fake exporting,” said Ernst & Young tax expert Tamás Vékási. In such schemes, the products leave Hungary only on paper, as VAT does not have to be paid in Hungary on products exported within the EU.
Merchants use fake documents to indicate that the goods were sold abroad then resell them in Hungary.
The products eventually end up in the shops after going though the hands of several intermediaries in the criminal ring.
During this process one intermediary reclaims the same amount of VAT from the state that was not paid by the first company in the chain, the “fake exporter,” Vékási elaborated.
Fraudsters also evade taxes by importing goods without paying the required VAT, then claim VAT refunds when the goods are sold.
Ernst & Young suggests that lawmakers could combat such schemes by lowering the VAT on basic foodstuffs to 10% from 27%, as lower tax rates would mean smaller profits for criminals.
Source: Hungary Around the Clock
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