Hungary: Retail tax goes against EU regulation

European Commission: Hungary’s retail tax goes against EU regulation

The European Commission has called on Hungary to comply with EU regulations and bring its retail tax regime in line with the freedom of establishment guaranteed by the Treaty on the Functioning of the European Union. According to the Commission's stance, the current taxation regime raises serious concerns, as the discrimination inherent in the system creates a significant competitive disadvantage for foreign-owned businesses. These businesses are subject to high and progressive tax rates, which are based on their revenue. In contrast, similar-sized domestic retailers operating in a franchise system, who operate under their own brand name and logo in the Hungarian market, are exempt from these higher tax burdens.

Agrárszektor.hu reports that the case highlights the urgent need for a review of the Hungarian retail taxation system and its alignment with EU standards. This is not only a legal obligation but also a crucial step for fair competition and economic development.

Success in the struggle against African swine fever

The National Food Chain Safety Office (NÉBIH) has announced this week that Hungary has made great strides in eradicating African swine fever (ASF).

As a result of the epidemic prevention measures introduced and consistently implemented over the past years, it will now be possible to reduce the risk classification of African swine fever (ASF) in certain areas. At its September meeting, the European Commission's Standing Committee on Plants, Animals, Food and Feed approved Hungary's proposal to reduce ASF-infected and high-risk areas.

Three counties, Békés, Jász-Nagykun-Szolnok, and Pest can now be reclassified, from high-risk areas to medium-risk.

In the areas reclassified as medium-risk, domestic pigs can be traded, transported to other member states, and wild boar carcasses can be used and sold without restrictions concerning ASF.

Conditions in high-risk areas have also improved, as domestic pigs can now be transported within the country without restrictions, and there is now an opportunity for wild boar to be processed and used domestically instead of being disposed of as before.

Wells pose new issues for water management, farms at danger

Online news portals reported on the state of the “well amnesty” in Hungary. According to the regulation, illegally drilled irrigation wells are sanctioned, only if they had been brought to the attention of  the authorities before the end of 2023.

The requirement to report and obtain a permit for the construction of household and garden wells, as well as wells used for agricultural irrigation, has been abolished as of January, 2024. The conditions are that the well’s depth does not exceed 50 meters, it does not connect to the first impermeable water layer of the aquifer, it is intended for household and/or agricultural use, and it is located in an area that is not designated for water resource protection.

However, according to the latest news, the number of legally drilled wells have not increased significantly. Illegal wells, however, pose a danger both to water users and to the country's water reserves, and those who comply with the laws and genuinely need the water are the ones who end up in the worst situation.

This summer heatwaves lasted 40 days, and water shortages have been widespread in the entire country in recent months, with groundwater levels in many places being several meters lower than the average of the past thirty years. One reason for the fact that the number of legally drilled wells is not increasing is the cost, as currently the drilling of a household well can cost €75-100 per meter.

Many wells which are thought to be legal actually infringe on the regulation, as most people only remember the 50-meter-depth rule, however, the top layer of the impermeable water layer is higher than this range. An expert from WWF told the press that  "the public saw the change as allowing anyone to drill anywhere, and that everyone can just continue using the water as they always have." Many companies still drill illegally due to customers being unable to pay for the higher, tax-included fees. Meanwhile, water management in the country is more complicated since it is unclear how much water is taken from underground reserves.

According to WWF’s expert, the main issue is that with the water supply, it is now a free-for-all. If the current anarchic situation continues, in the middle to long term, smaller farms will be at a disadvantage, as they cannot afford expensive, high-capacity irrigation systems and the construction of increasingly deeper wells.

Agricultural exports increased

The Institute of Agricultural Economics (AKI) has published its latest macroeconomic overview of the agriculture-food industrial complex. The value of Hungarian agricultural and food product exports was €7,019 million in Q1-Q2, 2024. The imports were worth €4,844. The trade surplus was €2,175 million, which was nearly €700 million more than in the first half of 2023.

The export value of agricultural and food products increased by 5.8%, the value of imports fell by 6.1%. Meanwhile, the value of Hungary’s national exports decreased by 5.6%, while imports fell by 10.9%. In the first half of 2024, the share of agricultural and food industry products in total national export value was 9.6%, and in import value, it was 7.4%.

During the same period, a significant increase was observed in the European Union's agricultural and food trade. As a result, the EU's agricultural trade balance closed with a surplus of €33.7 billion.