Hungary has decided to decrease the value added tax (VAT) on live pigs and half carcases in a bid to stimulate the country's consumption of pork and combat illegal trade. Effective from 1 January 2014, the tax was lowered from 27% to 5%.
The plan to reduce the VAT was first announced by the Hungarian Minister of Regional Development Sándor Fazekas in November 2013. Fazekas has also said that the VAT levied on some other food products might also be reduced by the government, but he did not specify which ones.
The latest move is part of the ministry's plan to increase the per capita consumption of pig meat in Hungary by 12% in 2014, up from the current 25 kg of pork per annum to 28kg.
In spite of this, local observers point that the reduced VAT on live pigs and half carcases is likely to have a limited impact on the country's pig meat consumption. This is due to the fact that pork and processed pork products will still be subject to 27% VAT in Hungary.
By 2022, the ministry's Pork Strategy aims to double Hungary's pig population to as much as 6 mill. head. It plans to achieve this through a series of implemented measures, including a government-run programme aiming to promote meat consumption among Hungarian customers, and the development of a Quality Hungarian Pork trademark, which is designed to increase the visibility of local pork products manufacturers.
The latest decrease is expected to mitigate the impact of Hungary's main 27% VAT rate, which is the highest among all European Union member states, on the country's meat industry. In late 2011, the Hungarian government decided to hike the tax from 25% to 27% in a move to increase state revenues and close the public deficit. The hike became effective in January 2012.
Some local analysts say the plan to reduce the VAT levied on certain categories of food could be related to the country's upcoming parliamentary elections, scheduled to be held in spring 2014.
Source: Hungarian Ministery of Regional Development