ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)880
Vol.1980/0277

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1i
• II
COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)880 final
Brussels,22December 1980
4
THIRDREPORTBYTHECOMMISSION TOTHECOUNCIL
onthederogation accordedtotheKingdomofDenmarkrelatingto
therulesgoverningturnovertaxandexcisedutyapplicable in
international travel(CouncilDirective No69/169/EECof28May1969
amendedbyDirectives Nos72/230/EECof12June1972,78/1032/EEC
and78/1033/EECof19December 1978)
I:/B ,
I Id •
/■>
x
C0MC80)880final

-1-
Thira report bythe Commission
onthederogation accorded totheKingdom ofBeiiuiark
relating totherules governing turnover taxand
excise duty applicable ininternational travel
(Council Directive No.69/169/EEC (l)of28May1969
amended byDirectives Nos.72/230/EEC (2)of12June 1972 ,
78/IO32/EEC (3)and78/1033/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 1978was
submitted on17January 1979 ,andasecond report (C0M(80 )33)covering the
■period from 1October 1978 toend-September 1979 wassubmitted on
1February I98O .
This third report fulfils theundertaking forthe12months ,1October 1979'
30September 1980 .
II.Thederogating .provisions
1.Annex VII ,PartV(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
(1)0JKo.L133of4.6.1969
(2)0JNo.L139of17.6.1972 .
(3)0JNo.L366of28.12.1973 .
•A

«2-
cxoir-03 -applicable in -international passenger travel ,the following goods :
–tobacco Droaucts :
-distilled coverages andspirits ,ofanalcoholic strength exceeding 22$vol ;
-beer ,only forquantities exceeding 2litres ,
2.Ontheexpiration ofthis period ,inaccordance with paragraph l(c)of
part VoftheAnnex concerned ,the Council prolonged theauthorisation ontwo
occasions (l),first until 31December 1976 andthen until 31December 1977 *
3.TheDanish Government subsequently requested afurther period inorder
fully toapply the Community system ofallowances .Incontrast tothetwo
previous derogations ,which were limited tooneyear ,the Council adopted
on'19December 1977 »aDirective granting aderogation toDenmark from the
regime inquestion until 31December 1982 (2).This derogation provides for
aprogressive alignment oftheDanish system with theCommunity rules .
III .Quantities ofthe tax allowances since 1January 1978
Danish resiaents having
stayed inanother Member
State Products
less than
72h(3)more than
72h(1)(3 )Community resiaents
staying inDenmark
less than
24h(2)more tnan
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
nôquant ity
limit40
20
20
100300
150
75
400
1.5
noquant ity
limit
(1)These quantities arethose ajjlicable under theCommunity system .
(2)From 1.1,1980 the24hour condition nolonger applies .
(3)Prom I.I.I98I to31.12.1982 ,thef2hour condition will bereduced to
48hours .
(4)From 1.1.1982
increased from 40to60.the40cigarette allowance will be
(1)Directive 76/134/EECof20.1.1976 (OJNo .L21of29.1.1976 );
Directive 77/72/EECof18.1.1977 (OJNo.L23of27.I.I977 ).
(2)Directive 77/800/EECof19.12.1977 (OJNo.L336of27.12.1977 ).
/•

-3-
From1*1.1980thespecial24hourderogationforConmrunityresidentsstaying
inDenmarkwasabolished.TheDanishGovernmenthavenotreportedany
negativeeffectsresultingfromabolitionofthisrule.
IV-Taxlegislation
1.Denmark
Thevalueaddedtaxratewasincreasedfrom20.25%"to22.0$on29June1980,
whereitremainedduringtherestoftheperiodunderexamination.This
increaseintheVATratemeantthattheaverageretailpricelevelwas
raised "byabout1.5Asaconsequence ofthisincreaseintheVATrate
y
theexcisedutyoncigaretteswasamended.Thespecificexciseon
cigaretteswentfrom40«H/reto41/reperpieceandtheproportional
elementwasreducedfrom23.4i°to21.68$oftheretailprice.Thetotal
taxburden,inclusiveofVAT,,onapacketof20cigarettesrosefrom
14.60Krto14.91Kr.
On27February1980theEuropeanCourtannounceditsdecisioninthecase
brought "bytheCommissionagainstDenmarkforbreachofArticle95on'--
excisesleviedonalcoholicdrinks.TheDanishtwo-tierexciseonspirits
wascondemnedbytheCourt.TheDanishGovernmentproposedanewmixed
specific/advaloremsystemfortaxingspirits.Thissystemwasadoptedby
thePolketingandcameintoforceon1June1980.
Theexcisedutyonspiritsinthemixedsystemiss95^Perlitre100per
centethanolstrengthplus37•5percentofthetaxablevalueoftheproduct
(includingthespecificandadvaloremduty).
Theexcisedutyonbeerhasnotbeenchangedduringtheperiodunderreport.
2.Germany
Nochangesintheratesoftaxesrelatingtotheproductswhicharethe
subjectofthepresentreporttookplaceduringtheperiodunderexamination.
•/

V.Danish crowr /German mark
Asmentioned inthesecond report ,theGerman mark wasrevalued lay2%and
theDanish crown ;asdevalued "by35^against thesixother EMS™currencies
inthefirst realignment ofparities within theEMSon24September 1979 »
andtheDanish crown was again devalued on30November 1979 "by5
Theaverage exchange rate inSeptember 1980 (when theperiod under report
came toanend)was309.59 Bkr=100DM.Intheprice comparison onpage 6
anexchange rate of289Dkr«100DMhas "been used forend-September 1979 sand
309«59 Dkr=100DMforend–September 1980 .During theperiod under report
theDanish crown hadthus effectively depreciated by7.1 f°vis-'k-visthe
German mark .
VI.Relative evolution ofretail prices ofthe products inDenmark and in
Germany
Following thepattern established inthefirst tworeports ,theprice
comparison hasbeen made between end-September 1979 andend-September I98O .
Theevolution inDenmark and inGermany oftheprices oftobacco products
andofalcoholic drinks between end-September 1979 and .end-September I98O
issummarised inTable I.The'products used asthebasis forcomparison are
the same products asshown inthe same table inthe first and second reports .
Theprices shown have been furnished bytheDanish Government .They
represent average prices inDenmark oftheproducts concerned and anattempt
toestablish typical prices forthe same products onsale inGermany inthe
region close totheDanish border .TheGerman prices have been confirmed as
being broadly correct bytheGerman authorities .
1.Tobacco products
TheVAT rate increase inDenmark meant that theretail price ofcigarettes
ontheDanish market went upby2.6 fo.OntheGerman market theprices
ofDanish brands ofcigarettes remain unchanged ,expressed inDM,but
expressed inDkrthey have been increased by7 This means that the
total effect hasbeen aminor reduction ofthegapbetween prices of

-5-
cigarettesinDenmarkandGermany,andthereforealsoareductioninthe
absoluteamountwhichtheDanishtravellerwillsave"by"buyinginGermany,
Asfarassmokingtobaccoisconcerned,pricesinDenmarkandGermanywere
stillclosetoeachotheratSeptember1980.
2.Spirits
Intheperiodunderobservationmostoftheretailpricesonspiritswere
changedsubstantially ontheDanishmarket#Forspiritsofthemore
expensivequalityandaquavittheretailpriceswereincreasedbutfor
otherspiritstheretailpriceswereingeneralreduced®Asshownin
Table1,theDanishretailpricesforcognaoandaquavitincreasedby5-8"j
whereasbrandedwhiskyandginwerereducedinpricebyabout15$,On
theGermanmarket,theretailpricesofcognacandwhiskywerereduced,
whereastheretailpricesofginandaquavitincreased.
Thetotalconsequences ofthenewtaxation-systeminDenmark,theprice
changesandthedevaluationoftheDanishcrown,havebeenthatthegap
betweenDanishandGermanspiritspriceshasbeenwidenedforexpensivepro­
ductsbutnarrowedfor'otherproducts,(seealsoChaptersIVandIX),
3.Beer
Asmentionedinthesecondreport,itwouldbepreferabletocomparethe
evolutionofpricesforthesameproductinthetwocountries,insteadof
comparingthepriceofDanishbeerinDenmarkandthepriceofGermanbeer
inGermany.TheCommissionhasnowobtainedthenecessaryinformationin
ordertocomparetheevolutionofpricesofDanishbeerinDenmarkaswell
asinGermany,
Duringtheperiodunderreport,thefiguressuppliedtotheCommission
suggestthatthepriceofDanishbeerinGermanyincreasedbyabout15$
inDM^^buthasonlybeenincreasedbyabout6$inDenmark,This,in
combinationwiththedevaluation ,meansthatthepriceadvantageofbuying
inGermanyinSeptember1979at40i°hasbeenreducedtoabout31$by'
September1980,
PartofthispriceincreasecouldbethattheSeptember1980price
includesdepositonthebottle*

enoftheretailpricesoftypicaltobaccoproductsand
alcoholicdrinksin.Denmark .andGermany
T 2^3I-TT
PRO^r;:^ Date!DanishjGermanpricejDiff.3as
priceIin in!»
Sept.|inDkrjDkr*DM|Dkr.|
lanauli■■fT«fji:of1j
Cigarettes(300)Danishbrandl1979247«50130®0545.00117.4547.5%
1980253.80139.3245.00114.4845.1%
Change1979-1980 'I2.6%7.1%0.0-2.5#-2.41o
Smokingtobacco.50£j19798.508.673.00-0.17-2.0%
19803.908.672.800.232.6%
Change1979-1980 4.7%06.7fo\ ,4.61o
Cognac»**70cl j1979175.0067.9223.50j107.0861.2$
1980I188.0061.8619.98126,1467.I%
Change1979-1980 7.4$-8.9-15.017.855+5.9%
Whisky(5years)70cl.1979135.0049.1016.99j85.9063.6%
1980]115.00 j49.0715.8565.9357.3
I
Change1979-1980 |-14.8$-0.1%-6.7fo-23.2/o-6.3%
Gin,70cl* 1979134.0040.4013.9893.6069.9%
1980113.0055.6017.9657.4050.8%
Change1979–1980 [-15.71°y(.6%28.5%-2>8.Tf°-19.1%
Aquavit .,70cl(Danish)197980.0045.6015.7834.4043.0%
1980.85.OO55.6617.9829.3434.5%
Change1979-1980 6.3%22.1%13.9£-14.7*;8.5
BeerPilsen6bottlesof197919.3011.503.987.8040.41°
0.331(Danishbeer)198020.4014.094.556.3130.91o\
Change1979-1980 5*1%22.555 .14.3?cî-19.1"/l-9.5f»
*Exchangerateuseds
end–September1979*100DM«*289Dkr
" M1980i100M-309.59Dkr.

-7-
VII.RelativeevolutionoftaxesontheproductsinDenmarkandGermany
ChapterVTdealtwiththeevolutionofretailpricesintheperiodunder
report.Butassomeoftheretailpricesareaffected "bytemporaryor
atypicalfluctuations ,suchasdiscountsales,specialoffersandthelike,
acomparisonof"totaltax"oneachproductcategoryinthetwocountriesis,
intheCommission *sview,amorereliableguide.
ThebasicdataaretheexcisedutyplustheVATleviedonthatrate.The
"totaltax"thusdeterminedinGermanyforeachproductcategoryhasbeen
convertedfromDMtoDkronthebasisoftheaverageexchangerates
applyinginthemonthsreferredtoinTable2.ThetotaltaxinGermany
equals100ineachcase0ThefiguresshowninTable2arethetotaltax
inDenmarkasapercentageofthatinGermany.
Table2
Indaxforthe"totaltax"inDenmarkcomparedwithGermany(Germany-100^
Jan»1978 Sept.1979Sept.1980|1Sept.1980
|MMIeinarnriMKini
Cigarettes 221 218 255 240 1!273
Cognac) (510l580
Whisky\511 502486(.373l425
f
Gin) (371;422
Aquavit 333 327 316 315 «358
Beer 833 '818792. 750 853
100DM- 212Kr277Kr.289Kr309.59KrI272Kr
Asstressedinthesecondreport,Table2offersausefuladditional
referencepointinindicatingwhatchangesinthedifferencesbetween
DanishandGermantaxlevelswillberequiredinorderthatthepresent
largedifferencesinretailpricesmaybesubstantially reduced.
TheindexshowsthatinDenmarkinSeptember1980thetaxoncigarettes
wasrelativelyhigherthanatthebeginningofthefiveyearderogation
period,thattherelativetax011beerhadbeenslightlyreducedandthat,
forspirits,therelativesituationremainedmoreorlessunchanged.
/

TholactcolumninTabls2chow?how*cli8situationwould,haveheen^ifthe
exchangerate"bgtvgen,l>Ksjid.^kj.had.remained,unchanged ,fromJanuary1978
untilSeptember1980.Inthissituation,allthreeproductcategorieswould
have"beenrelativelyhigherinSeptember1980thantheywereinJanuary
1978.Inisolation,theeffectofthefiscalpolicyfollowedinDenmark
»
since1978.hasthereforebeer?towidenthegap,ratherthantonarrowit.
VIII.Transportcostsin-Denmark
Table3:Transportcosts
Departure
pointDistance
fromtheReturnpricesinDkr.lypical
petrol
frontier
inkm."byorganisedbus
Sept•Sept.
19791980bytrain
Sameprice
Sept.1979
andcostsbycar*
Sept•Sept•
19791980
...Sept•I98O
JAalborg 27025 1 202 205257
IAarhus 175 2° !150 I!33166
IOdense 150!5 1116 !114143
IFredericia 100 10 1 74 7695
IVojens5010
Lin.nui–a––7 34 3848
*Basedonacarusing11petrol(3*80Kr/linSept»1979snå.4*75Kr/lin
September1980)per10km.
Table3showsthatthe"price"Tororganisedday-tripsor"shopping
excursions"bybusisvirtuallynil.Theexplanationliesinthepractice
ofGermanbordersupermarkets topaythebuscompanieseverhighersubsidies
perpassengerbroughttothesupermarket fromDenmark.TheCommissionhas
earlierdrawnattentiontotheproblemoftheunrealistically lowcosts
forbuspassengers,andviewstheirfactualabolitionwithconcern.
Intheperiodunderreport,thetransportcostsbyprivatecarincreased
by25fo,whereasthecostsbytrainremainedunchanged. '-

-9–
IX#Conclurions
Duringtheperiodunderreviewtherehas"beenanegligibledecreaseinthe
pricegapbetweenthepriceofcigarettesand"beerinDenmarkandGermany.
ThiseffectissolelyduetothedepreciationoftheDanishcrown,relative
totheDM.
Thenewmixedsystemfortaxingspiritsmeansthatthepricegap"between
thecheaperspiritsproductssoldinDenmarkandinGermanyhasdecreased.
Ontheotherhand,forthemoreexpensiveproductssoldonthetwomarkets,
thegaphaswidened.Moreover,thesubstantial advaloremelementinthe
mixedsystemhastheeffectofmultiplyingdifferencesinpre–taxprices
byafactorof2ormore(dependingonthesizeoftheretailermargin).
Consequently ,•thepricegapbetweenthemoreexpensiveproductsonsalein
DenmarkandGermanywillinfuturebemuchlesssensitivetoany
devaluationintheDanishcrownrelativetotheDM.Thispricesectoris
ofcoursetheareawherethegreatestsavingscanbemadebybuyingin
Germany.Itfollowsthatthemixedsystemhasaggravatedthesituation
forexpensivespirits,asituationwhichonlycanbereversedbya
reductionoftheadvaloremelementofthespiritsexcise.
Asregardsthecomingyear,theCommissionhas.nofirminformation of
plannedchangesintheexcisedutiescoveredinthisreport,whetherin
DenmarkorGermany,althoughtheDanishMinisterofFiscalAffairsds
understoodtobeconsidering reducingtheexcisedutyonwine.Sucha
stepwouldundoubtedly easethebordertradeproblem.
Inconclusion,theCommissionnotesthatingeneral–asin1978and1979~
nosignificantprogresshasbeenachievedin1980inreducingthedifferences
betweenthepricesoftheproductsconcerned.Onthecontrary,the
introduction -ofthemixedsystemfortaxationofspiritsinDenmarkhas
introducedanewproblemaggravatingthesituationforexpensivespirits.