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08/10/2013

Increasing alcohol taxes is the right thing to do, how many more will follow Poland and Finland?

In the times of economic crises some countries are moving in the right direction by increasing the tax on alcohol which serves for the benefit of both, public health and public finances at the same time.

This week Poland and Finland have proposed increase in alcohol tax levels in their next year’s budgets.

Polish Finance Minister Jacek Rostowski is aiming for an increase to excise taxes on tobacco products by 5 percent, and alcohol by 15 percent.

The measures follow the cabinet's approval on Friday of the draft budget for 2014, which looks to decrease the country's deficit, with revenues reaching 276.9 billion zloty (65.6 billion euro), and spending at 324.6 billion zloty (76.9 billion euro).

Finland is also planning tax hike on alcohol in 2014 under the Ministry of Finance proposal the tax on alcohol would be increased by 2.15 euros a litre of 100 per cent alcohol. This would translate into tax hikes of 5 to 8.6 per cent depending on the category of alcoholic beverage.

Prices of spirits would increase on average by 2.2 per cent, beer and wine prices would be up on average by 2 to 2.5 per cent, and price hikes for intermediate products would average 3.7 per cent. Overall prices would increase by an average of 2.3 per cent. Retail prices would rise slightly more and on-licence prices slightly less.

The Cabinet Committee on Economic Policy also expressed its support for measures aimed at curbing travellers' imports which remain high in Finland. From September 2012 to August 2013, imports increased by some 11.5 per cent over the corresponding period last year.

In the EU current minimum excise duties have not been changed since 1992, meaning that their real value has decreased approximately one third because of inflation. Back in 2006 the European Commission had made a proposal to adjust minimum levels for inflation. At that time unanimity was not obtained and the proposal remains ‘still on the table’ in the Council.

The issue of alcohol excise duties would be best addressed at the European Union level, as countries are often affected by interventions beyond its powers to control.

Increase in alcohol excise duty rates would in most countries lead to increased alcohol tax revenues for the public budgets. Given the current economic crises and search for more money it makes perfect sense to increase alcohol taxes.

Sources used:

Finland Times: Cabinet Committee backs moderate increase of tax on alcohol

Polish Radio: Poland plans tax increase on tobacco and alcohol