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Commission mulls overhaul of alcohol excise duties

On 1 March 2017, the European Commission released an Inception Impact Assessment for a proposal to revise the Directive on the harmonization of the structures of excise duties on alcohol and alcoholic beverages. The Commission’s proposed initiative, which will potentially begin its legislative process in 2018, aims to harmonise excise duties on alcohol and alcoholic beverages in all Member States.

In its Inception Impact Assessment, the Commission clearly states the intention to redefine the different taxation categories and focus on the differential rates for low strength alcohol beverages and the exemptions of small breweries that can distort competition. Another important procedure the Commission wants to tackle are the different denaturing methods between Member States and the accompanied abuse of these different measures from economic operators.

With this inception impact assessment, the Commission wants to strengthen the internal market, optimise tax revenues for Member States and lower administrative burden for national authorities and economic operators alike.

During the evaluation of the 92/83/EEC Directive, the Commission found that the product categories defined by the Directive are currently incomplete and lead to possible tax evasion by alcohol producers. They also expressed clear concern on the reduced excise rate on low strength alcohol as this influences the consumer choice and their health.

In a report on the expected impacts, the Commission admits the negative consequences a revision of categories may have on certain economic operators. Furthermore, they acknowledge how it could distort the competitiveness between alcohol producers if some beverages must change excise duty categories and others can produce at the same excise rate.

The Commission presumes it justified to revise the lower excise duty on low strength alcohol. The principle behind this lower taxation is the belief that consumers would replace strong alcohol with lower strength alcohol but the Commission finds this is not necessarily true. The lower costs of low strength alcohol spur consumption and not just substitution. Therefore, the Commission finds it justified to adjust the lower excise duty on low strength alcohol.

It is of the utmost importance, that stakeholders representing the interest of the alcohol industry, ensure that any potential revision on excise duties respects the EU principle of proportionality.

Moreover, stakeholders must ensure that their voice is properly heard, to strike the right balance between health of EU citizens, eliminating tax evasion and creating tax income for Member States on the one hand, and the encouragement of business activity, survival of small breweries and sellers on the other.

Any revision established on the excise duties on alcohol must take into consideration stakeholders’ views and expertise.

GPA will be ready to keep you abreast of any further changes in status of this sensitive issue within the EU’s legislative process. We can help you make your voice heard as well as preparing you for any implications the Initiative may have on your business.

Sensitive issues:

  • Redefine category of fermented beverages

  • Revise the reduced rate for small producers of alcohol and alcoholic beverages across all sectors

  • Revise and adjust the levels of low strength alcohol

  • Harmonise the use of the “Euro” CDA denaturant

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