Reverse-charge VAT could stabilise Hungary's fruit and vegetable sector more effectively than a VAT cut, according to Sándor Nagypéter, president and CEO of producer organisation DélKerTész. He argues that fraud prevention, transparency, and margin structures have more structural impact than headline tax reductions.
DélKerTész, based in Szentes, supplies fresh paprika and tomatoes to domestic and export retail chains. Nagypéter proposes introducing reverse-charge VAT in a similar way to the cereal sector, shifting the VAT obligation from seller to buyer. If the buyer has deduction rights, the wholesale transaction becomes VAT-neutral, with VAT paid only by the final consumer.
"In fresh produce, this immediately removes the incentive for missing trader and carousel fraud. There is no VAT amount to disappear with." He adds that reporting obligations on quantities and values would provide authorities with clearer market data and improve transparency. He notes that in cereals, producers moved into the general VAT regime to reclaim VAT on inputs while not charging VAT on outputs.
On the proposal of a 5% VAT rate, Nagypéter says pricing volatility in fresh produce limits guaranteed consumer pass-through. "Fresh produce pricing is highly volatile. Prices move week to week, even day to day, due to seasonality and weather shocks. In such an environment, it is very difficult to ensure that a VAT cut is permanently reflected in consumer prices." He states that a reduced rate should follow sector clean-up and be paired with structured, product-chain margin agreements between suppliers and retailers.
Hungarian growers face higher compliance costs linked to EU food safety, traceability, sustainability, and labour standards, while imports may operate under less demanding origin-country rules. Domestic factors such as sectoral taxes, packaging-related EPR fees, and rising labour and service costs also affect competitiveness. Organisational cooperation remains around 21% to 25%, with a target of 40% to 50% to improve retail bargaining power.
DélKerTész reports that 90% of fresh volumes are sold through retail chains, 8% via wholesale, and 2% directly to consumers. Export growth is linked to the Czech and Slovak markets, and to cluster tomato programs in Romania and Bulgaria. Competition from third-country imports and increased EU greenhouse capacity, particularly in tomatoes, are identified as constraints.
The group's new logistics hub has expanded cold storage and packing capacity, aiming to improve handling efficiency and secure member returns. On proposed margin caps for tomatoes and paprika, Nagypéter says short-term demand support is possible, but long-term fixed caps may shift pressure onto suppliers and alter trade flows. He concludes that regulatory design will influence whether domestic supply remains economically viable.
Source: Budapest Business Journal
