Comment - Alcohol Excise: The Unintentional Dangers of Tax Increases
In the European Union, around 55% of the price paid for a bottle of spirits is tax
Last week, the European Commission should have received all the budget proposals of the countries in the Euro zone, and will consider them in the light of its recommendations issued back in May.
By November, the Commission will go back to those that are not proposing enough in terms of reducing the deficit gaps, reforms, etc. As part of this exercise, the Commission recommended to many countries to lower the tax burden on labour and to increase it on consumption.
While we agree with the first, we have difficulty with the second proposition.
As a result, at least nine countries are proposing to raise their excise duties on spirits for 2014. As a result, on average, more than 55% of the price paid for a bottle of spirits within the EU is tax: Value Added Tax and excise duties.
We want to warn not only Member States and the Commission, but also public health NGOs, about the consequences of such unsustainable tax burden on our products.
First of all, extra revenues for the exchequers do not necessarily follow because consumers have the option of substitution: When commercial and legal products are not available (or too expensive), demand shifts to the illicit market. This is not a myth: remember those unfortunate 47 dead in Czech Republic and neighbouring countries last year from methanol-tainted products.
And yet, to get the expected revenues, enforcement will have to be improved, which is both cost- and labour-intensive, requiring resources and the existence of appropriate structures and mechanisms.
In short, exchequers will not get the expected revenues; the legitimate spirits industry that generates growth and employment will suffer and, last but not least, there could be severe health consequences for those consuming non-commercial alcohol.
This item initially appeared on SpiritsEurope's website earlier this week.
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