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13/11/2006

EU finance chiefs postpone the decision on alcohol tax hike

On Tuesday 13 November, the EU Finance Ministers failed to agree to the European Commission's proposal to raise the minimum rates of excise duty on alcohol.

The Commission had proposed a 31% increase to restore the real value of EU minimum rates as agreed in 1992 by taking into account average EU-wide inflation.

According to the Brussels executive, the majority of Member States would be unaffected by this proposal since their national rates already exceed the proposed new minimum rates. For those countries affected by the decision the actual impact on prices would be minimal, for example, for beer, the biggest required increase in national excise duty would be of the order of € 0.01 (one eurocent) on half a litre of beer.

However, this was too much for certain countries, particularly Germany which led the field in opposing the plans.

On 28 November, the EU Chiefs of finances tackled the issue once again at the ECOFIN meeting. Since the last meeting the Commission had presented some ideas for a possible compromise whereby the revalorisation of the excise duties on alcohol would only date from 2004 in line with the accession of the EU10 (4.5% increase for all products). It also suggested the possibility of an automatic revalorisation mechanism. The Finnish Presidency in its new compromise proposal differentiated the revalorisation between the duties for beer (by 4.5%) and other alcoholic products (by 31%).

Finally the ministers decided to delay the decision and invited the Commission to “carry out a comprehensive study of the taxation of alcohol and alcoholic beverages, including trends in competitive positions and in levels of taxes and prices, and to present the results of that study during the first half of 2007, with a view to facilitating further Council decision-making as regards alcohol taxation”.

EU Council press release:

http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ecofin/91899.pdf