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IP/06/1165

Brussels, 8 September 2006

Alcohol taxation: Commission proposes increases of minimum rates

The European Commission has adopted a proposal to increase the minimum rates of excise duty on alcohol and alcoholic beverages agreed in 1992, from 1 January 2008. Considering the need to avoid the EU system of minimum rates becoming meaningless and in line with the request of the Finance Ministers of the Member States' to come forward with this proposal, the Commission proposes to increase the minimum rates taking into account the inflation since 1992 and, therefore, restore their real value. The majority of Member States are unaffected by this proposal as their national rates already exceed the proposed new minimum rates. However, for those Member States that will have difficulties to increase their national rates immediately transition periods, up to 2010, are proposed. Although the inflation rate is 31%, the economic and social impact of the proposal can be considered as 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, at the latest by 1 January 2010.

"The minimum rates are the cornerstone of the EU excise duty system which was agreed in 1992 as the minimum necessary for the functioning of the internal market" said Taxation and Customs Union Commissioner László Kovács. "Revalorising the minimum rates is a necessary step to restore the position to that which was agreed in 1992."

Increasing the minimum rates and providing transitional periods.

The proposal foresees:

  • Revalorisation of the minimum rates in line with inflation from 1993 to 2005, (which is in the order of 31% ) to take effect from 1 January 2008;
  • transitional periods up to 1 January 2010 for those Member States that may have difficulties in increasing their national rates by 1 January 2008 to meet the revalorised minima.

More specifically, for those Member States that are required to increase their national rates by more than 10% but less than 20%, a transitional period to 1 January 2009 is proposed; for those Member States that are required to increase their national rates by more than 20%, a transitional period to 1 January 2010 is proposed.

The proposal will increase the minimum rates as shown in the following table:

Product
Rate expressed
Per
Present minimum rate
Minimum duty on typical item based on present rate
Indexed minimum rate on
31/12/2005
(present rate x 1.31)
Minimum duty on typical item based on indexed rate
Wine (Still and sparkling)
Hectolitre
0 €
0 €
0 €
0 €
Beer
Hectolitre and per degree Plato
or
Hectolitre and per % of alcohol by volume
0.748 €
or
1.87 €
0.0467 €
half litre of beer at 5% vol (or 12.5 ° Plato)
0.98 €
or
2.45 €
0.0612 €
half litre of beer at 5% vol (or 12.5 ° Plato)
Intermediate products (e.g. fortified wines such as port wines, sherry etc )
Hectolitre
45 €
0.315 €
70cl bottle
59 €
0.413 €
70cl bottle
Ethyl alcohol and spirit drinks
Hectolitre of pure alcohol (100 % by volume)
550 €
1.54€
70cl bottle at 40% vol
720 €
2.017 €
70cl bottle at 40% vol

Which effect on what type of product in what country?

The economic and social impact of the proposal can be considered as minimal. For example, for beer, this would have as a consequence that the Member States most affected would have to increase their national excise duty by € 0.01 (one eurocent) on half a litre of beer, at the latest by 1 January 2010. For the consumer, and based on subsequent retail price adjustments, this increase is likely to represent less than the typical EU annual inflation rate.

In addition, as far as SME are concerned, provisions already exist whereby small businesses (breweries and distilleries) can benefit from reduced rates, however, that is a matter for the Member States concerned to determine.

The national rates already applied by the majority of Member States are in excess of the proposed revalorised minima and consequently no action will be required by them.

However, the national rates currently applied in several Member States are below the proposed revalorised minima and consequently they will be required to increase their national rates, as follows:

BEER

Member State
Current national rate €
% increase required to meet new minimum rate
0.98 €/ ° Plato or 2.45 €/ % vol
Additional duty in € on a half litre of beer at 5 % vol (or 12.5° Plato)
Per degree Plato
Per % of alcohol by volume
Malta
0.746

31.3%
€ 0.0145
Latvia

1.87
31%
€ 0.0144
Germany
0.787

24.5%
€ 0.0120
Luxembourg
0.7933

23.5%
€ 0.0116
Czech Republic
0.81

20.9%
€ 0.0105
Lithuania

2.03
20.6%
€ 0.0104
Spain
0.91

7.7%
€ 0.0043

INTERMEDIATE PRODUCTS[1]

Member State
Current national rate €
% increase required to meet new minimum rate – 59€/hl
Additional duty in € on a 70cl bottle
Greece
45.00
31%
€ 0.0976
Cyprus
45.89
28.5%
€ 0.0915
Malta
46.57
26.6%
€ 0.0867
Portugal
54.57
8.1%
€ 0.0309
Spain
55.53
6.2%
€ 0.0241

ALCOHOL AND SPIRIT DRINKS

Member State
Current national rate €
% increase required to meet new minimum rate – 720€/hl 100% vol
Additional duty in € on a 70cl bottle at 40 % vol
Cyprus
610.71
17.9%
€ 0.31
Slovenia
695.14
3.6%
€ 0.07

Background

Council Directive 92/84/EEC on the approximation of the rates of excise duty on alcohol and alcoholic beverages sets down the minimum rates as shown in the above table. Above these minima Member States are free to set their national rates at levels they consider appropriate. The Directive also provides that periodic reviews of the minimum rates are carried out by the Commission. In this respect, the Commission presented its report on 26 May 2004 (COM(2004)223) (see IP/04/669 and MEMO/04/126) for discussion in the European Parliament, the European Economic and Social Committee and Council. The report concluded, among other things, that in order to maintain the real value of the minimum excise duty rates, Member States could consider a re-valorisation and so avoid them becoming meaningless over time. In the discussions that followed, the Council, on 12 April 2005, called on the Commission to come forward with a proposal to adjust the minimum rates in order to avoid a fall in their real value and to provide transitional periods for those Member States who may have difficulties in increasing their rates.

http://ec.europa.eu/taxation_customs/taxation/excise_duties/alcoholic_beverages/studies_reports/index_en.htm


[1] E.g. fortified wines such as port wines, sherry etc up to 22° alcohol


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