Czech Republic Steadfast In Opposition To EU Booze Tax Hike

by Ulrika Lomas, Tax-News.com, Brussels

30 November 2006

A second attempt by European finance ministers to agree a minimum level of alcohol tax across the European Union has been derailed, after the Czech Republic rejected a compromise proposed by the Finnish presidency that would have dramatically reduced the proposed duty increase on beer.

The European Council of Finance Ministers (Ecofin) was meeting to discuss a European Commission proposal to increase the minimum duty on certain alcoholic beverages by 31% to take account of inflation over the last 14 years, which was the last time that the duty rates were increased.

The Czech Republic, which takes great pride in its beer brewing industry, has consistently opposed the proposal, fearing that the tax hike would hit beer consumption (the Czechs each downed 156.5 litres in 2005 according to the Czech Brewers Association - the highest in Europe).

The original proposal to increase minimum duty by 31% would have resulted in a relatively small increase in the price of drinks at the point of sale, about one euro cent per half litre of beer, according to the European Commission.

However, the Czechs were not even prepared to accept a compromise whereby the minimum duty on beer would be increased by just 4.5%, but the tax on spirits subject to the new measures would go up by the original 31%. They argued that it is unfair that certain other drinks, such as wine, are not subject to the new measures, therefore benefiting wine producing member states such as France and Italy.

"We can't agree with the growing disadvantages when the minimum rate for wine is zero. This puts at a disadvantage a typical Czech product," Czech Finance Minister Vlastimil Tlusty stated after the meeting.

The Czech Republic is now the lone dissenting voice on the issue after Germany, which previously opposed the EC's proposal, decided to accept the Finnish compromise, and Latvia, which had backed the Czech Republic, has also fallen into line.

Changes to EU tax law must receive unanimous approval from all 25 member states before they can be implemented, and the task of trying to force the duty hike through will now pass to the Germans, who will assume the six-month rotating presidency of the EU in January. However, it is thought that the issue will not be addressed again until Spring 2007 at the earliest.

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