Brewers wage war on national excise duties

Date: 18/01/01

By Peter Chapman

EUROPEAN brewers are declaring war on huge variations in excise duties among EU countries, claiming they create mayhem for the industry and feed wholesale fraud and organised crime.

The battle lines have been drawn as the European Commission prepares to unveil a study into the workings of Union rules dating back to 1992 that set minimum levels for taxes in the drinks sector.

The legislation to be reviewed later this year has failed to encourage a single market for beer and has left in place huge rate discrepancies from one member state to the next, says Martin Rees, campaign leader for the Brewers of Europe and a partner in UK law firm DLA.

Glaring examples include the two-to-one difference between Sweden and Denmark - which were linked last year by a bridge, making it easier for Swedes to save money by buying their beer abroad - and the almost ten-to-one variation in duties per litre of normal strength beer between the UK and France. Even small variations in rates between high-tax countries such as non-EU Norway and Sweden can cause a flurry of activity between the two, industry groups argue.

Rees says these variations are making life difficult for many brewers in countries that border a relatively low-duty member state - and are fuelling unsustainable booms in border outposts, such as Calais in France, where customers take advantage of bargain-priced drinks for re-import. Worse still, he claims, the distortions feed the profits of organised criminals who buy up cut price drinks and re-sell them illegally to the retail trade or directly to customers.

"There are two results," Rees says. "First there is massive cross-border shopping for alcoholic drinks. This is not real shopping; it is tax-induced shopping. Secondly it creates the opportunity for fraud within member states and smuggling between them."

Industry groups acknowledge that national governments are unlikely to accept overnight changes to their excise regimes - which would require unanimous agreement in the Council of Ministers. Instead of harmonised rates, Rees hopes governments will be won over by what he claims is a pragmatic interim solution that has the potential to win approval even from high-tax Scandinavian countries.

Under the plan - currently being "well received" by Union governments, the Commission and MEPs - high-duty countries would not be required to cut their rates. Instead EU states would boost cooperation with each other on excise duty issues in situations where obvious distortions to the single market were taking place.

According to Rees, this would be accompanied by more concerted action to "reduce the incidence of fraud and smuggling".

European brewers are declaring war on huge variations in excise duties among EU countries, claiming they create mayhem for the industry and feed wholesale fraud and organised crime.