The value-added tax (VAT) charged on ESL and UHT milk will decrease from 18% to 5% on 1 January, Minister of State for Agriculture Dr Zsolt Feldman pointed out at a press event held at a CBA supermarket in Budapest’s Corvin Plaza.
Ministry of Agriculture expects that the VAT cut should result in lower prices and more legally compliant business practices.
The next step in the gradual reduction of the value-added tax on liquid milk involves the introduction of a 5% VAT rate on ESL (long-life) and UHT (milk processed at ultra-high temperatures) milk as of 1 January 2019. Dr Feldman added that lowering the tax charged on agricultural products has been one of the government’s priorities since 2014. The VAT cuts have already lowered the price of pork, offal, eggs, fish, and fresh milk.
The latest VAT cut is justified because all ESL milk sold in Hungary is produced domestically, and it has a 30% market share is. As for UHT milk, about 85% of it is produced in Hungary. The market share of this product type is close to 60%.
It is consumers who will primarily benefit from the tax decrease. As proven by the previous VAT cut (on fresh milk), almost all of the tax decrease is expressed in lower consumer prices. As an additional benefit, the share of the black economy within milk trading may fall, along with the recurring dumping of foreign milk onto the Hungarian market.
According to Dr Feldman, the Ministry of Agriculture still considers cutting the VAT on a wide range of staple foods as an extremely important step towards boosting Hungary’s agriculture and food sectors, and improving their regional competitiveness.