ARCHIVES HISTORIQUES
DELACOMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (80)33
Vol.1980/0014

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)33 final
Brussels .1stFebruary 1980
SECOND REPORT BYTHE COMMISSION TOTHE COUNCIL
ONTHE DEROGATION ACCORDED TOTHE KINGDOM OFDENMARK
RELATING TOTHE RULES GOVERNING TURNOVER TAX AND
EXCISE DUTY APPLICABLE ININTERNATIONAL TRAVEL
(COUNCIL DIRECTIVE No.'69/169/EECOF28MAY1969
AMENDED BYDIRECTIVES Nos.72/230/EECOF12JUNE 1972 ,
78/1032 /EEC AND 78/1033 /EECOF19DECEMBER 1978 )
■t ■ ■■■■■"■■
./•
COM (80)33final
»

Second report "bytheCommission
onthederogation accorded totheKingdom ofDenmark
relating tothe rules governing turnover taxand
excise duty applicable ininternational travel
(Council Directive No.69/169/EEC (1)Df28May1969
amended byDirectives Nos.72/230/EEC (2)of12June 1972 ,
78/IO32/EEC (3)and78/IO33/EEC (3)of19December 1978 ).
I. Introduction
On19December 1977 »theCouncil adopted adirective according toDenmark
anewderogation from theCommunity system ofallowances .
Onthis occasion ,theCommission -undertook todraw upeach year ,starting
in1978 ,areport ontheevolution oftheprices ofalcoholic drinks and
tobacco products inDenmark andGermany ,ontheevolution offares for
travellers inDenmark ,andonthefiscal policy oftheDanish Government .
Afirst report (COM(78 )774)covering theperiod toend-September 1978 was
submitted on17January 1979 *
This second report fulfils theundertaking forthe 12months ,1October
1978 -30September 1979 .
1
II.The derogating provisions
1»Annex VII ,Part V(Taxation )oftheActofAccession totheEuropean ^
Communities oftheKingdom ofDenmark ,.Ireland andtheUnited Kingdom of
Great Britain andNorthern Ireland authorised Denmark ,until 31December
1975 »toexclude from thetaxallowances relating toturnover taxes and
excises applicable ininternational passenger travel ,thefollowing goods :
-tobacco products ;
-distilled beverages andspirits ,ofanalcoholio strength exceeding
22° ;
-beer ,only forquantities exceeding 2litres .
(1)OJNo.L133of4.6.1969
(2)OJNo.L139of17.6.1972 .
(3)OJNo.L366of28.12.1978 .

-3
2.Ontheexpiration ofthis period ,inaccordance with paragraph l(c)of
part VoftheAnnex concerned ,theCouncil prolonged theauthorisation on
twooccasions (1),first until 31December 1976 andthen until 31December
1977 .
3.TheDanish Government subsequently requested afurther period inorder
fully toapply theCommunity system ofallowances .Incontrast tothetwo
previous derogations ,wjhich were limited tooneyear ,theCouncil adopted
on19December 1977 »aDirective granting aderogation toDenmark from the
regime inquestion until 31December 1982 (2).This derogation provides
foraprogressive alignment oftheDanish system with theCommunity rules .
III .Quantities ofthe tax allowances since 1January 1978
ProductsDanish residents having
stayed inanother Member
State
-less than
72h(3)more than
72h(1)(3)Community residents
staying inDenmark
less than
24h(2)more than
24h(1)
cigarettes
or
cigarillos ■
or
cigars
or
smoking tobacco
(grams )
distilled beverages
(litres )
beer (litres )40(4)
20
20
100300
150
75 ,
400
.1.5
noquant ity
limit40
20
,20
100300
I50
75
400
'■1.5
noquantity !
limit I
(1)These quantities arethose applicable under theCommunity system
(2)From 1.1.1980 the24hour condition will nolonger apply
(3)From I.I.I98I to31.12.1982 ,the72hour condition will bereduced to
48hours .
(4)From 1.1.1982 to31.12.1982 ,the40cigarette allowance will be
increased from 40to60.
(1)Directive 76/134/SECof20.1 .1976 (OJNo.L21of29.1.1976 );
Directive 77/72/EECof18.1.1977 (OJNo.L23of27.1.1977 ).
(2)Directive 77/8OO/EECof19.12.1977 (OJNo.L336of27.12.1977 ).
/.

IV.Tax legislation
1• Denmark
Asmentioned inthefirst report ,thevalue added tax rate was increased
from 18$to20.25$ on1October 1978 ,where itremained during theperiod
under examination .This increase intheVAT-rate meant that theaverage
retail price level wasraised by1.9$ »
- ' '
Theexcise duties onspirits andbeer have notbeen changed during the
period under report .By-contrast theexcise duty oncigarettes wassharply
increased on12July 1979 *Th® specific excise oncigarettes went ,from
33«5/reto40.11 preperpiece andtheproportional element wasincreased
from 22.4$ to23.04$ oftheretail price .Thetotal taxburden ,inclusive
ofVAT ,onapacket of20cigarettes rose from 12.33 kr.to14.60 kr.The .
excise rates onother tobacco products remained unchanged .
2.Germany
With theexception ofachange intherates ofvalue added tax ,the
standard rate ofwhich Wasincreased from 12$to13$on1July 1979 ,no
changes intherates oftaxes relating totheproducts which arethe
subject tothepresent report took place during theperiod under
examination .TheVAT increase meant that thegeneral retail price level
wasraised by0.9$ .
V. Danish crown /German mark
InSeptember 1978 ,theaverage exchange rate fortheDanish crown against ^
theGerman mark was275*96 Dkr.»100DM.On16October 1978 ,theparity
oftheDanish crown wasdevalued by4$against theGerman mark .On
13March 1979 ,theEuropean Monetary System was introduced .On24September
1979 ,inthefirst realignment ofparities within theEMS since its
inception ,theGerman Mark was"revalued by2$andtheDanish crown was
devalued by3$against thesixother EM!>-currencies .
Theaverage exchange rate inSeptember 1979 (when theperiod under report -
came toanend)was289«43Dkr.=100DM.Accordingly .,intheprice
comparison onpage 7,anexchange rate of289Ekr-100DMhasbeen used
forend-September 1979 »However ,this rate does notreflect thewhole
effect ofthedevaluation of24September 1979 *?y1November 1979 ,"the
exchange rate forDkr.toDMwas295*47 Dkr.«100M;that is,2.2$
weaker than therate used intheprice comparison .
VI.Relative evolution ofretail prices ofthe products inDenmark and in
Gennany
Following thepattern established inthefirst report ,theprice comparison
hasbeen made between end–September 1978 andend–September 1979 *

t-5-
Theevolution inDenmarkandinGermanyofthepricesof-tobaccoproducts
andofalcoholic drinks "betweenend-September 1978andend-September 1979
issummarised intableI.Theproducts usedasthebasisfor.comparison
arethesameproducts asshownfor1978inthesametableinthefirst
report.
Asinthefirstreport,thepricesshownhavebeenfurnished bytheDanish
Government .Theyrepresent averagepricesinDenmarkoftheproducts
concerned andtypicalpricesforthesameproducts onsaleinGermanyinthe.
regionclosetotheDanishborder.TheGermanpriceshavebeenconfirmed as
beingbroadlycorrect bytheGermanauthorities .
1.Tobaccoproducts
Inthefirstreport,theonlydataavailable totheCommission relatedto
cigarettes whichfellintodifferent pricecategories intheDanishand
Germanmarkets.Ithasnowbeenpossible tocomparethepriceinDenmark
ofcigarettes inthemostpopularpricecategory withthepriceinGermany
ofcigarettes inthepricecategory "towhichtheDanishcigarettes belong.
Inorderthattheevolution ofpricesmaybeseenduringbothyears,the
comparison forcigarettes inTable1havebeenmade,notonlyfor.the.period
end-September 1978 "toend–September 1979fhutalsoforend-September 1977
toend–September 1978.,
Asthesefigures show,theevolution ofthepricesofcigarettes from
September 1977toSeptember 1978wasvexylimited,withnopricechange
inGermanyandonlya0.5%increaseinDenmark.This,inconnection with
asmalldevaluation oftheDanishcrowninrelation totheGermanmark,
resulted in.aminorreduction ofthegapbetween DanishandGerman .
cigarettes ,bothintheabsolute amountsavedbybuyinginGermanyand .
intherelative pricedifference .
Duringthepresentperiod–fromSeptember 1978toSeptember 1979–the
gaphaswidened.The'retailpricesofcigarettes inDenmarkhave
increased by20.4InGermanythepriceincreasehasbeen11.3$expressed
inDkr.and6.1%expressed inDM.Thismeansthattheamountsavedonone
packetcfcigarettes boughtinGermanyhasincreased bymorethanathird.
Inrelativeterms,apacketofcigarettes was39.3^cheaperinGermanythan
inDenmarkinSeptember 1978,but44$cheaperayearlater.
Asfarassmokingtobaccoisconcerned ,pricesinDenmarkandGermanywere
closetoeachotheratend-September 1979t "theDanishproducts beingthe
cheaper.
2.Spirits
Theretailpriceofcognachasincreased inDenmarkaswellasinGermany ;
overall,therehasbeenonlyaminorincrease intherelative price
difference .Forwhisky,thepriceshavechangedonlyslightly }thegap
betweentheDanishandGermanpriceshaBnarrowed marginally .Forgin
andaquavittherehasbeenanincrease inretailpricesinDenmarkbuta
decrease inGermanysothatthegaphaswidenedconsiderably .

Asinthefirstreport ythepricecomparison ismadebetweenthepriceof
DanishbeerinDenmarkandthepriceofGermanbeerinGermany.The
comparison showsthattherelatively smallincreaseinretailpricein
Denmarkhasbeencompensated bythedevaluation ofthe'Danishcrown,so
thattheoverallsituation wasmoreorlessthesameatend–September 1979asatend–September 1978«
RatherthancomparethepricesofDanishand.Germanbeers,itwouldbepreferable tocomparetheevolution ofpricesforthesameproductin
thetwocountries .Thenecesftaiy information tomakesuchacomparisonforpastyearsisnotavailable.n.o>toveT,theCommission hasnowobtained
information onthepricesofDanishbeer-,i,, ai;end-September -1979
andexpecttobeabletomakeasame-product comparison inthenextreport

TABLE1
Evolution oftheretailpricesoftypicalto"baccoproducts and
alcoholic drinksinDenmark andGermany
-PRODUCTSTime
Sept.1
Danish
price
inDkr2
Germanprice
in
Dkr(IM)*3
Diff.
in
Dkr.4
3as
$
of1
Cigarettes (300)Danishbrand 1977204 121.50 I45.00)82.5040.4$
/
Change1977-19781978205.5
0.5%124.65 1
2.5$(45.00)1
(0)80.85
-1.8$39.3%
-1.1$
ICigarettes (300)Danishbrand 1978205.5124.65(45.00)80.85 39-3%
Change1978-19791979247.5
20.4$138.72
11.3$(48.00)
(6.7$)108.7
34.5$44.0$
4.7$
Smoking tobacco ,50g.
H tt
/
Changes1978-19791978
19798.-
8.50
6.3$7.48
8.67
15.9$(2,70)
(3.00)
(11.1$)O.52
-0.176.5$
-2$,
-8.5$
Cognac***70cl.
Il
Changes1978-19791978
1979155.-
175.-
12.9$60.67
67.92
11.9$(21.90)
(23.50)
(7.3)94.33
107.0C
13.5$60.9$
61.2$
0.3$
IWhisky(5years)70cl 1978132.-47.06(16.99)84.9464.3$
t» ft
Changes1978-19791979135.-
2.3$49.10
4.3$(16.99)
(0)85.90
1.1$63.6$
-0.7$
Gin.70cl
M »•
Changes1978-19791978
1979125.-
134.-
7.2$43.18
40.40
6.4$(15.59)
(13.98)
(-10.3)81.82
93.60
14.4$65.5$
69.9$
4.4$
IAquavit.70cl(Danish) 197878.-49.83 ι17.99)28.1736.1$
»» .t
Changes1978-1979 ^1979|80.-
2.6$45.60 I
-8.5$,I(15.78)
(-12.3)34.40
22.1$43.0$
'6.9$
IBeer.Pilsen.6bottles j
of0.33 197818.60 8.28 .2.99)10.3255.5$
I(Danish.German,respectively )I197919.30 8.64^.99)10.66I55.2$
Changes1978-1979
Danishbeer . 19793.8$
19.304.3$
11.50 ((0)
[3.98)3.3$
7.8-0.3$
40.4$
*Exchange rateused:
atend-Sept ember1977:
M1978 %
"« «1979:100IM-270
100EM»277
100EM«285'Dkr
Dkr
Dkr

-8-
VII .Relative evolution oftaxesontheproducts inDenmark andGermany
Indirect ,taxes(i.e.exciseplusVAT)leviedinDenmarkandGermanyonthe
greatmajority oftheexamined products accountforatleasthalf-and
oftenamuchhigherproportion –oftheirretailprice.Manufacturing and
distribution costsofeachoftheexamined products areunlikely todiffer
"byanysubstantial marginbetween Germany andDenmark.Andevenifsuch
costdifferences doexist,theircontribution tothedifferences between
theretailpricesofeachoftheproducts inDenmarkandGermany mustbe
relatively small,bycomparison tothatofdifferences intherelative
taxburdens.Consequently ,itmaybeassumedthatacomparison between
thetaxesimposed oneachcategory ofproductinthetwocountries will
offerareliable guidetochangesinthedifferences betweentheretail
pricesoftheseproducts# Atax-only comparison alsoenjoystheadvantage
overacomparison betweenretailpricesofbeingunaffected bytemporary
oratypicalfluctuations inretailprices,suchasdiscount sales,special
offers,andthelike.
Forthesereasons,acomparison betweentheexciseplustheVATleviedon
theexciseineachofthetwocountries oneachproductcategory hasnow
beenprepared fortheperiodcovered bythisreportandtheprevious
report.ThisissetoutinTable2below.
ThebasicdataistheexciserateplustheVATleviedonthatrate.The
"totaltax"thusdetermined inGermanyfbreachproductcategory hasbeen
converted fromDMtoDkr.onthebasisoftheaverageexchange rates
applying inthemonthsreferred tointhetable.ThetotaltaxinGermany
equals100ineachcase.Thefigures showninthetablearethetotal
taxinDenmarkasapercentage ofthatinGermany.
Table2
Indexforthe"totaltax"inDenmarkcompared withGermany (Germany =100)
January 1978September 1978September 1979
Cigarettes 221 218. 247
Aquavit 333 327 316
Otherspirits $11 502 486
Beer 833 .818 792
AsTable1showschangesinretailprices,andTable2showstheDanish
"totaltax"asapercentage oftheGerman,thesetwotablescannotbe
directly compared.
•/•

-9-
Nevertheless ,Table2offersausefuladditional reference pointin
indicating whatchangesinthedifferences between DanishandGermantax
levelswillberequiredinorderthatthepresentlargedifferences in
retailpricesmaybesubstantially reduced.
Forcigarettes andbeerthetrendsshowninbothtablesarebroadlyinthe
samedirection .Forspirits,thepricechangesforwhiskyandcognacshown
inTable1areconsistent withtheslightly reducedgapintaxshownin
Table2.Otherspiritsprices,however,pointtoaninoreased gapbetween
retailprices,notwithstanding theslightly reducedtaxgap.Thissuggests
thattheseincreased -retailpricedifferences stemfrompricechanges
unrelated totaxation .
VIII.Transport costsinDenmark
Table3:Transport costs
Departure
pointDistance
frorathe
frontier
inkmReturnpricesinDkr. lypical
petrol
costsby
car*byorganised busbytrain
Aalborg 270 25 202 205
IAarhus 175 20 150 155
IOdense 150 15 116 114
IFredericia 100 10 74 76
Vojens 50 10 34 38
*Basedonacarusing11petrol(3*80kr/l)per10km
Transport costscanbeofimportance forDanescontemplating ashoppingtrip
toGermany,particularly ifthedistance involvedisconsiderable .Table3
showsthattheorganised day–tripsor"shopping excursions "bybusofferby
farthecheapest meansoftravelling between DenmarkandGermany.In.-.'
particular ,thefactthatorganised daytripsbybuscostonlyafraction
ofthe,trainfaresuggeststhatsuchtripsaresubsidised .
IX.Conclusions . ■
/
V
DuringtheperiodunderreviewtheDanishcigarette taxhasbeenconsiderably
increased ,andtheDanishVATratehasbeenincreased bymorethantheGerman
VATrate.Thesechangeshavesignificantly inoreased thegapbetweenthe
pricesofcigarettes inDenmarkandinGermany *
/.

-10-
Lookingtospiritproducts asawhole,thepricegaphasbeenslightly
increased ,becausetheretailpricesofsomeoftheproducts havedecreased
inGermanyevenmorethantheDanishcrownhasl?eendevalued.Forbeer,
thesituation isbroadlyunchanged .
Thederogation forDenmark fromtheCommunity regimeoftaxallowances from
1January1978until31December 1982hasnowbeeninforcefornearlytwo
years."Fortheproducts coveredbythederogation ,theirpriceshavein
generalincreased more'inDenmarkthaninGermany ;thesituation wouldhave
beenworseifDenmarkhadnotdevalued thecrown,asmentioned onpage4«
Asregardsthecomingyear,itisalreadyapparentthatthefulleffectof
thedevaluation inSeptember ,andthelatestdevaluation oftheDanishcrown
by5$on30November 1979»willincrease Germanprices,expressed inDanish
crowns,bymorethan7OtherthanaproposalforachangeintheGerman
exciseoncigarettes ,whichwillhaveonlyaminorinfluence ontheretail
pricesforcigarettes ,noproposal hasasyetbeenmadetochangetheexcise
dutiesinDenmarkorGermany. <
Inconclusion ,theCommission notesthatingeneral–asin1978–no
significant progress hasbeenachieved in1979inreducing thedifferences
betweenthepricesoftheproducts concerned .Onthecontrary ,sofaras
cigarettes areconcerned ,thepricegaphasincreased considerably ,asa
directresultoftheDanishtaxincreases .