EU split scuppers new wine tax

Related tags European union

The EU's main wine-producing countries, led by France and Italy,
this week torpedoed discussions to raise the minimum excise duty on
all alcoholic drinks, fearing a domestic backlash from vintners,
reports Chris Mercer.

Minutes from the meeting of the EU Council of Economics and Finance Ministers said representatives had failed to agree on suggestions for a new EU minimum rate covering all alcoholic drinks, after opposition from wine nations.

"12 member states vehemently opposed any proposal aimed at establishing a higher minimum excise duty for wine,"​ said the Council meeting summary.

Council members did agree to get the EU Commission to draw up proposals adjusting the original duty rates for beer, spirits and fortified wine set in 1992, though a Commission spokesperson said these would probably not be ready until next year.

And with continued opposition from powerful wine-producing nations like France, Italy and Spain, wine may again have to be left out of the equation altogether for now.

Current minimum rates, which were introduced in 1993, left the base rate for wine at zero, effectively leaving the decision of whether or not to set any tariff up to member states themselves.

Of the main wine producing countries, only France has introduced an excise duty for wine above zero, albeit at €0.02 per 70cl bottle, and this has angered non-wine producing countries like Sweden and Finland who have higher duty rates and want others to catch up.

Last year, the Commission published a report on EU alcohol taxation inferring its support for a new EU-wide excise rates framework covering all alcoholic beverages, yet conceded "the issue of wine taxation remains a very controversial and politically sensitive issue"​.

Governments in the major wine-producing countries fear a domestic backlash from their wine industries if they force them to swallow increased excise rates when already feeling the heat of competition from New World brands.

France in particular has seen a raft of vintner protests in recent months accusing the government of failing to support the industry, and lambasting a government public health campaign warning people to cut down on their alcohol intake.

Protests have been particularly fierce in France's Languedoc-Roussillon region where last month riot police struggled to control angry wine-makers and were forced to use tear gas during a rally in Montpellier.

Just to add to the mix, there are also concerns in France that any more high-profile interference from Brussels could swing the up-coming referendum on the EU Constitution towards the 'no' camp.

Opinion polls suggest the 'no's already have a clear lead for the vote on 29 May, and President Jacques Chirac has just begun the campaign to bring voters round - though any new tax on wine may cause many people to say no in protest.

Many are already annoyed at EU plans to open up Europe's services industry to greater competition.

Nevertheless, the EU Council meeting on Tuesday did agree on the need to increase the existing alcohol duty rates set in 1992, and work towards greater harmonisation of rates between members to avoid fraud and smuggling on the market.

"It is clear to all that the widely divergent levels of alcohol taxation in member states distort the market and facilitate fraud and smuggling, but without the agreement of all member states nothing can change,"​ said former taxation commissioner Frits Bolkestein.

The Council also largely agreed with the Commission that member states should consider raising the minimum excise duties for beer, spirits and fortified wine at least in line with inflation. This would mean an increase of around 24 per cent.

Such an increase would leave many countries' rates unaffected, though the push towards harmonisation may bring greater change.

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