Taxes and Border Trade A presentation at ALCOHOL use, harms and policy A researchbased NordicBaltic

1
Taxes and Border TradeA presentation at
ALCOHOL use, harms and policyA research-based
Nordic-Baltic seminarRiga, Latvia, October 3,
2005

• Esa Österberg
• Senior Researcher
• Alcohol and Drug Research, Stakes

2
Basic interests affecting alcohol taxation

• ? Economic development interests.
• - Ensuring the interest of wine producers.
• - Ensuring the interest of breweries and
  distilleries.
• - Ensuring alcohol-related employment.
• ? Fiscal interests.
• ? Interests in maintaining public order and
  safety.
• ? Interests in maintaining reproduction and
  health of the population.

Esa Österberg
3
Ways to tax alcoholic beverages

• ? A fixed rate per liter of the product.
• ? A fixed rate per liter of pure alcohol in the
  product.
• ? A fixed rate per liter per grade of original
  gravity in the finished product.
• ? A fixed percentage of the price of alcoholic
  beverages.
• ? Pricing by monopoly.

Esa Österberg
4
Alcohol excise duties in Europa in the 1950s
-1980s

• ? Difficult to compare alcohol tax levels and
  trends in alcohol excise duties in exact figures
  in Europe before the 1990s because of the
  different ways to collect alcohol taxes.
• ? Alcohol taxes were the highest in the Nordic
  countries and the lowest in the Mediterranean
  countries.
• ? In 1970 -1992 period alcohol taxes went clearly
  down in real terms in many countries. That is the
  case with for instance Austria, Denmark, France,
  Luxembourg and the Netherlands.
• ? In other European countries the overall trend
  in the 1970-1992 period was rather downward than
  upward.

Esa Österberg
5
Tax harmonization in European Communities

• ? The rationale first to assist the
  establishment and later the functioning of the
  single European market.
• ? The harmonization concerns all indirect taxes
  such as value added taxes, excise duties on
  alcohol, mineral oils and tobacco as well as all
  other forms of indirect taxation.
• ? Harmonization of excise duties on alcoholic
  beverages has not been a special case in itself.
  However, it has become a kind of special case
  because of the wide variation in alcohol excise
  duties and because of the different motivations
  for the implementation of alcohol excise duties.

Esa Österberg
6
The harmonization of alcohol excise duties

• ? Commission proposal in August 1987
• - Unified alcohol excise duty rates for different
  categories of alcoholic beverages in all member
  states.
• - Rates proposed by the Commission were an
  average or an adjusted average of the prevailing
  alcohol excise duty rates in different product
  categories in the member states.
• ? Commission proposal in August 1989
• - Minimum excise duty rates and target rates for
  different categories of alcoholic beverages.
• - Minimum rates in the 1989 proposal were lower
  than the proposed average rates in the 1987
  proposal.

Esa Österberg
7
EEC directives in autumn 1992

• ? Harmonizing the excise duty structures of
  alcoholic beverages in the member states
  (Directive 92/83/EEC).
• - Rules to define alcoholic products and product
  categories.
• - Definition of four basic alcohol product
  categories beer, wine, intermediate products and
  distilled spirits.
• ? Approximation of prevailing alcohol excise duty
  rates in the member states (Directive 92/84/EEC).
• - Setting minimum excise duty rate for each
  alcohol product category.
• - Setting target excise duty rate for distilled
  spirits.

Esa Österberg
8
Proposed alcohol excise duty rates, distilled
spirits per hectoliter pure alcohol, intermediate
products and wine per hectoliter and beer per
hectoliter and degree Plato
9
Effects of the 1992 directives on old EU members

• ? Despite the rather low minimum excise duty
  rates for alcoholic beverages four member states
  were forced to increase their excise duty rate
  for beer (France, Germany, Greece and Luxembourg)
  and four member states their excise duty rate for
  distilled spirits (Greece, Italy, Portugal and
  Spain).
• ? Some member states took the advantage to lower
  their excise duty rate for wine to 0 euro
  (Luxembourg).
• ? In creating the European common market in 1993
  travelers duty-free import quotas for alcoholic
  beverages were abolished.

Esa Österberg
10
Approximation of alcohol excise duty rates

• ? EU minimum rate for different beverage
  categories in 1993 euro per litre of 100 per cent
  alcohol
• Distilled spirits Intermediate Wine Beer
• products
• 5.50 2.50 0.00 1.87
• ? Minimum rates have not been changed since 1993.
  Their real value has decreased by nearly 30 per
  cent because of inflation.

Esa Österberg
11
Excise duty rates for distilled spirits in
January 1993 and April 2005, euro per liter pure
alcohol
12
Excise duty rates for beer in January 1993 and
April 2005, euro per liter of pure alcohol
13
Excise duty rates for wine in January 1993 and
April 2005, euro per liter pure alcohol
14
Travelers' duty-free import quotas inside EU

• ? In 1993 travelers duty-free import quotas for
  alcoholic beverages were abolished.
• ? Denmark got a derogation to keep the quota for
  distilled spirits until 2004.
• ? Finland and Sweden got the derogation to keep
  their import quotas for all alcoholic beverages
  until 2004.

Esa Österberg
15
Major Tax changes in the Nordic countries since
1990

• ? Before abolishing the import quotas for other
  alcoholic beverages Denmark lowered its excise
  duties for wine and beer by 50 per cent in 1991
  and 1992.
• ? Sweden decreased its excise duty rate for beer
  by 39 per cent in 1997 and its excise duty rate
  for wines by 19 per cent in 2002.
• ? In 2002 and 2003 Norway decreased its excise
  duty rate for distilled spirits by 25 per cent.
• ? Denmark decreased its excise duty rate for
  distilled spirits in 2003 by 45 per cent and its
  excise duty rates for beer and wine by 13 per
  cent in 2005.

Esa Österberg
16
Decreases in alcohol excise duties and prices of
alcoholic beverages in Finland in March 1, 2004
17
(No Transcript)
18
Alcohol excise duties in some EU member states in
May 2005, euro per liter of 100 per cent alcohol
19
Alcohol excise duties in some EU member states in
May 2005, euro per liter of 100 per cent alcohol
20
Alcohol excise duties in some EU member states in
May 2005, euro per liter of 100 per cent alcohol
21
Alcohol excise duties in some EU member states in
May 2005, euro per liter of 100 per cent alcohol
22
Alcohol beverages imported by travellers in the
Nordic countries in 2003, million litres
23
Total per capita alcohol consumption in 100 per
cent alcohol in the Nordic countries in 2003,
litres
24
Total alcohol consumption in Sweden in 1996-2004
in liters of pure alcohol per capita
Liters
Unrecorded
Recorded
25
Total alcohol consumption in Finland in 1996-2004
in liters of pure alcohol per capita
Liters
Unrecorded
Recorded
26
State revenues from excise duties on alcohol in
Finland and Sweden in 1990-2004, million euros
Finland
Sweden
27
Revenue from excise duties on alcohol in Estonia
in 2002-2005, monthly figures in thousands of
Estonian crowns
Month