Brussels shelves alcohol tax plans

- Last updated on GMT

Related tags: Member states, European union, United kingdom

A proposal which would have meant an increase in beer and wine
duties in some EU countries and a sharp reduction in others has
been scrapped by the Commission in the face of fierce opposition.

A proposal by the European Commission to increase the taxes levied on beer and wine in certain Member States, and to decrease them in others, has been dropped after it became clear that there was too much opposition, reports the Financial Times​.

The Commission had been seeking to harmonise alcohol duties across the Union, a move which would have seen beer prices in countries such as Germany and Spain rising by 17 per cent next year, while prices in the UK would have dropped substantially.

Many Member States, notably the UK, have long been opposed to any harmonisation of taxes across the Union, and officials have been particularly blinkered in their reaction to such criticism. The arbitrary date for the abolition of Duty Free sales across the Union in 1999 was set by officials who believed that duties would have been harmonised by then and that Duty Free would therefore be an anathema. No amount of objection from Member States, or indeed the simple evidence that prices still varied greatly, had any effect.

This time, however, the officials appear to have listened to common sense - although the fact that the proposals stood virtually no chance of being endorsed probably had a great deal to do with it. The paper said that the majority of Commissioners were opposed to the move, and that even the single market Commissioner, Frits Bolkestein, whose office was drawing up the proposal, had never given it his official go-ahead.

Member States would also have had to approve the proposals, and this was even less likely, since many believe that high taxes, or indeed low taxes, are part of their cultural heritage. For example, most of the wine producing countries in the Union levy virtually no tax on wine at all, while the Scandinavian countries have traditionally had high taxes to keep alcohol consumption low.

In the UK, alcohol has long been a major source of revenue for the government, even though manufacturers there have argued for many years that such high taxes promote smuggling.

The current EU regime allows countries to set levies at whatever rate they choose above an obligatory minimum, and as such is inefficient to say the least. While consumers across the Union would undoubtedly prefer to see the lowest possible taxation on alcohol, there is little room for compromise - either the countries where duties are high bring them down or they stay the same. Countries where duties are low are unlikely to meet them in the middle, as any price rise would be unacceptable to consumers.

Any changes will, therefore, have to come at national level, and governments have been stoic in their refusal to change their traditional duty patterns. The UK government for many years has known that reducing duties would not lead to a reduction in revenues, since sales would rise, but seems unwilling to do anything to change the status quo.

Related topics: Markets

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