Drinks taxes: the Bolkestein threat remains

Related tags European union

The different levels of taxation on wine, beer and spirits within
the European Union remains a 'distortion of the single market',
claims taxation Commissioner Fritz Bolkestein who, it seems, has
not abandoned his much-derided plans for harmonisation.

Last week, drinks producers across the European Union were celebrating a victory for common sense after it appeared that Internal Market and Taxation Commissioner Fritz Bolkestein had scrapped plans to harmonise drinks duties in the 15 Member States.

But their celebrations may have been somewhat premature. For despite the fact that Bolkestein's plans have come up against almost universal opposition, the Commissioner has not yet given up on them completely.

Speaking to the European Parliament's Committee on Economic Affairs last week, Bolkestein said that he was "adamant that something had to be done"​ about the issue, despite the opposition from a number of Member States, in particular the major wine producers.

The Commissioner said that the current system, whereby there is no maximum level of taxation set by the EU for wine, beer and spirits, leading to substantial differences from one country to another, was a "clear distortion of the internal market"​.

But finding a solution will be difficult, if not impossible. Bolkestein claims that the differences in taxation levels is one of the primary causes of smuggling within the Union, and while certain industry groups might agree - British brewers, for example, who have lost a huge amount of trade to their French counterparts because of lower taxes on that side of the Channel - most Member States agree that such taxes are a matter for national governments.

While consumers in countries where alcohol taxes are high - the UK and Scandinavia, for example - would benefit from harmonisation, those in other EU countries would suffer. A rise in beer prices would be unacceptable in Germany and most French consumers would consider it unthinkable to see the price of their beloved wine increase because of taxes imposed by Brussels. And while drinkers in the UK or Sweden might relish the prospect of cheaper alcohol, the governments there are less likely to agree.

London has always seen high alcohol taxes as a steady source of government income, and successive governments have simply refused to listen to requests from the industry for a reduction to more Continental levels in a bid to curb cross-border shopping. In Stockholm, the issue is one of health rather than revenue, with high taxes on alcohol in Sweden long seen as a deterrent to over-consumption.

Quite how Bolkestein plans to proceed with his taxation plans remains to be seen, but with the prospect of approval from the Member States extremely unlikely to say the least, the battle is likely to be long, hard and, ultimately, fruitless.

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