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4.17.3. Excise duties: alcohol and tobacco
LEGAL BASIS
Under Article 93 of EC Treaty, the Council is required to adopt measures for the harmonisation of ‘turnover taxes, excise duties and other forms of indirect taxation’ where this is ‘necessary to ensure the establishment and functioning of the internal market’.
OBJECTIVES
The rates and structures of excise duties vary between Member States, affecting competition.
Levying duties on products from other Member States at higher rates than on those domestically produced is discriminatory, and forbidden by Article 90 of the EC Treaty.
Very large discrepancies in the duty on a particular product can result in tax-induced movements of goods, loss of revenue and fraud.
Attempts have therefore been made since the early 1970s to harmonise both structures and rates, but progress has been slight, in part because of considerations other than the purely fiscal. For example, high levels of duty have been imposed in some Member States as part of general policies to discourage drinking and smoking. On the other hand, wine and tobacco are important agricultural products in some Member States.
ACHIEVEMENTS
A. Alcoholic beverages
A further difficulty in the case of alcohol has been disagreement about the extent to which different products are in competition with each other. In 1983 the Court ruled on the levels of duty in the UK on wine and beer (Case 170/78 ECR (1985)). The Court’s view was that the products could be considered substitutes since ‘the two beverages are capable of meeting identical needs’. The Commission has traditionally taken the view that ‘all alcoholic drinks are more or less in competition’ (COM(79)261). However, research for the Commission (see Study on the competition between alcoholic drinks: final report, Customs Associates Ltd., February 2001) indicates that the degree of competition varies between different products.
1. Structures
The Commission’s initial proposals to harmonise excise duties on beer, wine and spirits were made in 1972 (COM(72)225). Work on these in the Council was suspended at the end of 1974, and remained so despite Communications in 1977 (COM(77)338) and 1979 (COM(79)261). New draft legislation (COM(85)15) was also blocked. The Single Market programme of 1985, however, created a new impetus. All the existing texts on structures were eventually replaced by a new proposal (COM(90)432), which became Directive 92/83/EEC in October 1992. It defines the products on which excise is to be levied, and the method of fixing the duty (e.g. in the case of beer by reference to hl/degree plato or hl/alcohol content).
2. Rates
The Commission’s initial proposals under the Single Market programme (COM(87)328) were that for each product there would be a single Community rate, fixed as the average of existing national rates. For both wine and beer this would have been ECU 0.17 per litre, and for spirits ECU 3.81 per 0.75 litre bottle. Unlike VAT, however, few national alcohol excise rates are close to the average rate. No Member State found the proposals acceptable. The Commission then proposed a more flexible approach (COM(89)527). Instead of single, harmonised rates there would be minimum rates and target rates, on which there would be long-term convergence. Only the minimum rates were retained in Directive 92/84/EEC. The levels agreed were:
- alcohol and alcoholic beverages (i.e. spirits): ECU 550 per hl/alcohol;
- intermediate products: ECU 45 per hl;
- still wine and sparkling wine: ECU 0 per hl;
- beer: ECU 0.748 per hl/degree plato or ECU 1.87 per degree of alcohol.
Under the terms of the Directive, the Council should have reviewed these rates by the end of 1994 and adopted any necessary changes. However, no Commission proposals were published. A draft text suggested raising the minimum rates on spirits, intermediate products and beer to maintain their real value, and raising the minimum for wine from zero to ECU 9.925 per hl, but the text was not adopted. A Commission Report on the rates of excise duties was eventually published in September 1995 (COM(95)285 final). Instead of suggesting new levels of minimum excise rates, this proposed that the whole issue should be examined in the course of general consultations on excise duties with national administrations and with trade and other interest groups.
Following debate in the Council, the Commission presented a proposal in September 2006 to review the minimum rates and carry out an inflation adjustment for the period after 1992. The Commission’s preceding report (COM(2004)223) was presented to the Council on 26 May 2004. However, the Commission then had not made any proposal concerning levels of alcohol taxation because there was no agreement on how a rate adjustment should be achieved. Member States have very different views on the importance of alcohol excise duty rates, reflecting their own national circumstances, cultures and traditions. In 2006, however, the inflation adjustment was strongly brought forward by the Finnish Presidency.
Below are the current minimum rate levels laid down in EU legislation, which Member States are required to observe when setting their national rates. The following table shows the minimum rates for each product category expressed in euros per hectolitre per degree of alcohol, as well as the minimum rate expressed per litre of product at a degree of alcohol at which it is commonly sold.
| Product category | Minimum rate in euros per 100 litres per degree of alcohol | Minimum rate in euros per litre of product at the degree at which it is commonly sold |
| Wine | 0 | Wine (12°) 0 |
| Beer | 1.87 | Beer (5°) 0.1 |
| Fermented beverages other than wine and beer (e.g. cider and perry) | 0 | Cider (5°) 0 |
| Intermediate products (e.g. fortified wines such as port wines, sherry etc. up to 22° alcohol) | 2.5 | Intermediate products (18°) 0.45 |
| Ethyl alcohol and spirit drinks | 5.5 | Spirits (40°) 2.2 |
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The OPRD1 and OPRK1 loci in alcohol or drug dependence: OPRD1 variation modulates substance dependence risk
European Parliament legislative resolution of 10 July 2007 on the proposal for a Council directive amending Directive 92/84/EEC on the approximation of the rates of excise duty on alcohol and alcoholic beverages (
