European Commission publishes study on the minimum rates and structures of excise duties on alcoholic beverages

The present report has been prepared by the London School of Economics and it analyses whether the current tax system is causing distortions of the internal market and whether adaptations would be appropriate.

Full text of the study (pdf 2.45 Mb) (2.45 Mb)

Executive summary (pdf 186 Kb) (186 Kb)

The report notes that:

-Excise duties on alcoholic beverages constitute an important source of tax revenue in the EU27 (ranging from 0.2% to 3.5% of total tax revenues, excluding Social Security). Total duty receipts in the EU27 amounted to €30.6 billion in 2007
-Consumption of alcoholic drinks is important in the EU: 56 billion litres in 2007, approximately 113 litres per person. Beer: 66%, wine: 25% .

-The minimum duty rates were set in 1992, since then prices have increased by 44% while minimum rates have remained constant, which means they are lower in real terms than they were in 1992.

- Directive 92/84 only provides indication on the minimum rates. Member States Standard duty rates in the different Member States show a huge disparity. Large differences are observed between neighbouring countries UK and FR; FI and EE; and SE and DK. At present the level of minimum excise duties is so low compared to the rates charged in the countries with highest rates (FI, S, IE, UK) that they contribute little to reducing such disparities. As a result, the volume of cross-border shopping is significant.

-Duties are not being used as a trade barrier, i.e. they are not being used to discriminate between imported and domestic products.

The authors of the report suggest considering the following measures:

-Update minimum rates for all products to account for the inflation that has taken place since 1992.
-Remove different tax treatment for still and sparkling products.
-Remove different tax treatment for reduced-strength products (under the current framework reduced duty rates for low-strength products are possible). According to the authors of the report, this policy option simplify the tax system and make it more transparent to operators but it may also encourage movement away from lower-strength drinks, which may then have health implications, though the extent of this may be small given that cross-price demand appears in general to be inelastic.
-As well as a minimum rate, introduce a maximum duty rate.