Hungarian ‘chips tax’ wrecks Intersnack investment

By Ben Bouckley

- Last updated on GMT

Related tags Tax Hungary

Hungarian snacks firm Chio Magyarország – owned by German giant Intersnack – has slammed the country’s new ‘chips tax’ for ruining its chance of winning funding for new popcorn and snacks lines.

On September 1, Hungary introduced a tax on products considered excessively salty, sweet or with high caffeine levels, levied on the producer or first distributor.

Potato chips and other snacks will be taxed at 200 Hungarian Forints (Ft) per kg if salt content exceeds 1 per cent, with the exception of bread and pastry products.

However, a Ft 100 per kg tax applies to pre-packaged pastry items if sugar content exceeds 25 per cent; food flavours exceeding 5 per cent salt content will also be taxed.

Ostensibly, the government argued that the tax was for reasons of public health, but it will also net Ft 20bn (€68.7m) in tax revenues each year as a result.

Confirming the news, a Chio Magyarország spokesman told “We’re part of an international company [Intersnack], which has around 20 facilities across the EU.”

Tax ruined chances

Intersnack’s factories across the EU compete to secure capital investment for new production facilities, the spokesman said, and the ‘chips tax’ had ruined Chio’s chances.

Although the new investment programme relating to Chio’s facility in western Hungary had not been guaranteed, the spokesman said the company believed it had a “good chance”​ of securing 2 of Intersnack’s current investments.

He said these included establishing a new popcorn line, as well as a separate production hall (due to allergy issues) for peanut-based snacks.

“As soon as the chips tax came in we lost all chance [of the investments]. The reason for this is that, within the snacks industry, transport costs are relatively high," ​the spokesman added.

“Therefore, if you invest in a particular country, it is important that the domestic market is able to take a relatively high proportion of what you produce.” ​However, Intersnack had recognised that the new tax made this difficult, he said.

Although the Hungarian government had pledged to “leave the tax open”, ​with a view to revising it, the spokesman said he had learnt that morning that the government had indicated its intention to increase the tax, because returns were not high enough.

He said: “The government isn’t bothered about health with this tax, all that matters [for them] is the budget. We’re really very upset about this."

Chio had already successfully reduced salt levels in nut products, he added, and was also doing work to reformulate potato chips.

But he said the company was concerned by indications from the Hungarian government that it was concerned manufacturers were reformulating to avoid the tax.

Discriminatory measure

Tamas Eder, president of the Federation of Hungarian Food Industries (FHFI) shared these concerns and told this publication that the tax discriminated against specific product categories.

He said:“For instance, many processed cheese contains the same amount or even higher salt than some snacks under the tax. What we say is it’s not fair, disturbing the competition.”

Eder added: “The government said that this tax is trying to change eating habits of Hungarians and will put pressure on them to eat ‘healthier’ foods.”

But when it emerged this week that some processors were considering changing products to lower salt content, Eder said the government was upset.

He said: "It’s clear that it’s not about the lifestyle or unhealthy tradition of Hungarians, it’s about tax. The government needs the money because the state budget is in pretty bad shape"

But education rather than taxation was the appropriate path to steer, Eder said, with the quantity of food consumed the problem rather than so-called ‘unhealthy’ snacks.

“All such foods are produced by EU food processors under very strict regulations. Those foods are healthy and the problem is that people are eating too much of these foods and also their lifestyle,” ​he added.

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