EU Abandons Plan To Harmonise Alcohol Taxes

by Ulrika Lomas, Tax-News.com, Brussels

11 September 2002

Recent EU proposals for the harmonisation of beer and wine taxation throughout the EU have been abandoned as unworkable after a number of member states expressed fierce disagreement with the idea.

Since the single market began to bite, major differences in taxation (which makes up most of the price of many alcoholic beverages) have meant a dramatic escalation in 'arbitrage' purchasing by consumers near borders, with consequent losses to the exchequers of higher-taxing countries.

One of the most blatant examples of this is the cross-channel ship-borne alcohol and tobacco trade between the UK and its continental neighbours, where the UK Customs and Excise is on a hiding to nothing in trying to prevent people from importing massive quantities of product for 'personal consumption' which everyone knows they are going to sell to the local off-license (liquor store) for cash.

'There was a general feeling that the idea would be unpopular and do more harm than good', said a Commission official. 'It would have put up prices in several countries which also produce wine, hitting consumers and producers at the same time. And it would do little to stop abuses like smuggling.'

Some countries have also argued that there is a cultural dimension to alcohol production and consumption, as for instance with wine in southern Europe.

Now the way is clear for the new entrants to the EU to make the most of their cheap alcohol products - expect to see chains of cafes and supermarkets running up and down the borders between such country pairs as Hungary/Austria, Czech Republic/Germany, and Poland/Germany, once the inevitable transition periods are over.

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