Hungary exposes huge fake sugar deal, suspected tax fraud

BUDAPEST, June 19 Wed Jun 19, 2013 10:49am EDT

BUDAPEST, June 19 (Reuters) - Hungary's tax authority has questioned two men over a fake contract that, if fulfilled, would have involved the sale of nearly half a million tonnes of sugar - more than the country's annual sugar consumption - and a massive tax refund.

Value-added tax fraud is a serious problem in the country, which lifted the levy to 27 percent, the highest in the European Union, on many product groups in 2011.

The hand-written bill for 12.7 billion forints ($58 million) that caught the eye of tax inspectors was made out for a mediation fee with a VAT content of 2.565 billion forints - the sum that one of the suspected fraudsters tried to reclaim.

The suspects never had any sugar nor any intent to trade it, the tax authority said in a statement.

"Given that a truck load is 24 tonnes, this would have filled up 20,000 trucks - an awfully large amount of sugar," tax authority spokeswoman Melinda Horvath said.

The suspects, aged 32 and 37, have been questioned by tax authority inspectors in the past weeks. They may face prison sentences of up to 10 years.

They are not under arrest but a court has ordered that they cannot leave their home towns, Nagykoros, near Budapest, and Szeged on the southern border.

The tax authority investigated 1,500 VAT fraud cases last year, and the annual total value of its cases has been around 60 billion forints in the past years, Horvath said.

Typically, the fraud involves products such as sugar, edible oil, fertilisers and meat products, as some other EU member states apply a rate of less than 15 percent for certain foodstuffs.

U.S. commodities firm Bunge Ltd estimated last year that tax fraud linked to the sale of goods such as edible oils, sugar, coffee and meat could be worth up to 1 billion euros ($1.34 billion) a year in Hungary. ($1 = 0.7467 euros) ($1 = 219.3355 Hungarian forints) (Reporting by Sandor Peto; Editing by Alison Williams)

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