No C 237/36 Official Journal of the European Communities 12. 9. 88 
Opinion on the proposal for a Council Directive on the approximation of the rates of excise 
duty on alcoholic beverages and on the alcohol contained in other products (*) 
(88/C 237/12) 
On 11 September 1987 the Council decided to consult the Economic and Social Committee, 
under Article 198 of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 22 June 1988. The 
rapporteur was Mr Delia Croce. 
At its 257th plenary session (meeting of 7 July 1988), the Economic and Social Committee 
adopted the following Opinion by 80 votes to 13, with 6 abstentions (vote recorded). 
1. Introduction 
1.1. This Commission proposal is one of a series of 
tax harmonization proposals designed to help achieve 
a single large internal market by 1992. 
1.2. The proposal stems from the conviction that tax 
frontiers can only be dismantled when common rates 
of excise duties are charged uniformly throughout the 
Community. 
1.3. It is therefore proposed that a standard set of 
rates be charged on alcoholic beverages, and on the 
alcohol contained in other products, in all the Member 
States of the Community. 
1.4. The Commission recognizes that the problem of 
excise duties is more complicated than that of value 
added tax (VAT) because not only the rates but also 
the structures of excise duties differ widely from one 
Member State to another at the present time. 
1.5. The lowest standard VAT rate charged on the 
net price of a product in the Community differs from 
the highest standard VAT rate by only 13 percentage 
points, whereas rates of excise duty charged on wine 
differ by 280 percentage points. And if, in the case of 
wine, the effects of excise duties are combined with 
those of VAT, the rate of taxation charged on the basic 
price can vary from a minimum of 6% to a maximum 
of 380%. 
1.6. As far as the taxation of alcohol contained in 
distilled alcoholic beverages is concerned, the difference 
between the highest and lowest rates of excise duty is 
845%. Such extremes undoubtedly give us an exagger­
ated picture, but there is still no cause for optimism 
when we examine the whole web of existing differences 
in rates. 
1.7. The Commission's policy on excise duties has 
developed over a very long period of time. As early as 
1972 the Commission opted for a system whereby excise 
duties on wine would be determined by volume alone, 
(*) OJ No C 250, 18. 9. 1987, p. 4. alcoholic beverages would be taxed according to their 
alcohol content and beers would be taxed according to 
their original gravity. 
1.8. On several occasions since then the Court of 
Justice has taken decisions in respect of excise duties 
on alcoholic beverages. All of these decisions were 
aimed at solving problems of competition and prevent­
ing any kind of protectionism. 
1.9. The Commission is now proposing that excise 
duties on alcoholic beverages be standardized through­
out the Community at the following rates: 1271 ECU 
per hi of pure alcohol in the case of potable alcohol; 
85 ECU per hi in the case of intermediate products; 
17 ECU per hi in the case of still wine; 17 ECU per hi 
in the case of beer (12,5 ° Plato); and 30 ECU per hi in 
the case of sparkling wine. 
1.10. The Commission has not used a single criterion 
to fix the average common rates for the various catego­
ries of products. It realizes that the introduction of a 
single system of rates would have an extremely disrup­
tive impact on the tax revenues of individual Member 
States and on the distribution of the tax burden between 
the different categories of beverages. 
1.11. The Commission has therefore decided instead 
to adopt a pragmatic approach. Under the circum­
stances pragmatism is absolutely vital, although is does 
pose tremendous difficulties and inconsistencies. 
1.12. The Commission has considered three alterna­
tive methods of calculating the proposed rates: an arith­
metic average; a weighted average; and pure and simple 
approximation. 
1.13. An arithmetic average is out of the question 
because it embraces exceedingly heterogenous data and 
lumps together both small and big Member States ^dis­
criminatingly; it also embraces an extremely wide range 
of consumption. A weighted average on the other hand 
would also have the drawback of allowing large, high-
consuming Member States to dictate the pattern at the 
expense of small, low-consuming Member States. This 
would have a very great impact on markets and on tax 
12. 9. 88 Official Journal of the European Communities No C 237/37 
revenue. The only possibility left is therefore to find 
the most equitable solutions on a case-by-case basis. 
1.14. Assuming an unchanged pattern of consump­
tion, it is expected that the effects of the proposed rates 
on national revenue will generally be as follows: 
a) in Greece, Italy, Spain and Portugal there will be a 
substantial increase in tax revenue, 
b) in Belgium, Germany, France and Luxembourg 
there will be a modest increase in tax revenue, 
c) in Denmark, Ireland and the United Kingdom there 
will be a sharp reduction in tax revenue, 
d) in the Netherlands there will be a moderate 
reduction in tax revenue. 
However, the Commission neither provides back­
ground statistics nor quantifies its forecasts. This, plus 
the objective difficulty of evaluating trends in consump­
tion and trade following completion of the single mar­
ket, makes the task of examining the proposal all the 
more difficult. 
1.15. It is important to point out that in some cases 
excise duties on alcoholic beverages and alcohol are not 
a major source of revenue for Member States, but 
in other cases they are an important fiscal resource. 
However, quite apart from the revenue effects, excise 
duties on alcoholic beverages and alcohol have a signifi­
cant effect on consumer prices. In Ireland, for example, 
a litre of wine which costs 100 units tax-free, costs 
380 units with excise duties and 480 with VAT. In 
Denmark the same product costs 255 with excise duties 
and 315 with VAT. The figures are only slightly lower 
in the United Kingdom. In all the other Member States 
the effects are much more negligible. In Germany, Gree­
ce, Italy, Spain and Portugal there are no excise duties 
on wine. 
2. General comments 
2.1. It has to be accepted that more homogenous 
conditions of consumer taxation will be needed in the 
single European market if distortions of competition 
are to be reduced and price disparities narrowed. 
2.2. To achieve this objective, existing systems of 
charging and possibly excise duties themselves will need 
to be standardized. At the same time we cannot rule 
out the possibility that all excise duties will be abolished 
in the more or less distant future. 2.3. The Commission's proposal seeks to introduce 
common rates of excise duties in all the Member States 
of the Community. Given that its aim is to prevent 
unfair competition and make border controls superflu­
ous, the proposal is as a general principle acceptable. 
2.4. The extremely wide range of duties currently 
levied on alcohol and on alcoholic beverages can be 
attributed to very different traditions, and different 
economic and social constraints, so there might be a 
case for allowing a number of disparities to continue, 
albeit within certain limits. The newly proposed VAT 
system, which provides for a choice of rates within a 
reasonably narrow band, could serve as a model here. 
2.5. Adoption of the proposal would result in the 
abolition of border controls although a number of 
significant barriers would still remain. Since products 
would, as now, be taxed at the place of consumption, a 
system of customs depots, national identification VAT 
procedures and special way-bills would still be needed. 
Needless to say procedures and regulations also be 
standardized in such a way that they are not dissimilar 
to arrangements already in force in each Member State. 
In this connection we must regret the failure of the 
Commission to propose rules and regulations on cus­
toms depots or free warehouses. 
2.6. Like the proposed arrangements for VAT, com­
mon rates of excise duties would have to take effect no 
later than 31 December 1992. All Member States would 
be at liberty to make full or partial adjustments before 
this deadline. A more satisfactory solution would be to 
prescribe full alignment in stages. 
2.7. The deadline of 31 December 1992 must remain 
firm. However, given the obligation to gradually align 
rates before this date (i.e. with the process of conver­
gence unquestionaly underway, and with prior harmon­
ization of excise structures), it might be a good idea to 
build up a system of provisions and derogations which 
would also permit the standardization of rates after 
31 December 1992. 
2.8. Since excise duties increase consumer prices, 
their level should be set as low as possible. This is 
not what seems to be happening in the Commission 
proposal. 
2.9. At the present time wine does not attract excise 
duties in five Member States of the Community, and in 
one other Member State (France) duties are extremely 
low. These countries account for 90% of Community 
consumption. It therefore seems excessive to want to 
make excise duties obligatory in all Member States, 
No C 237/38 Official Journal of the European Communities 12. 9. 88 
especially if the impetus for doing so comes from geo­
graphical areas that account for only 10% of Com­
munity consumption. 
2.10. Wine should therefore be exempted from excise 
duties. Beer could also be exempted in order to ensure 
fair competition and because, like wine, it forms part 
of the normal everyday diet in many Member States. 
2.11. The revenue generated by the introduction or 
reintroduction of a tax on the consumption of wine in 
certain Member States might not justify the extra red 
tape and administrative work which would be needed. 
Nor must we forget that wine is an agricultural product 
in heavy surplus. A sharp fall in consumption due to a 
rise in taxation would make the present difficult situ­
ation even more serious and costly to the Community. 
2.12. The system of customs warehouses, which 
already presents problems in the case of alcohol and 
liqueurs, would appear to be wholly impractical in the 
case of beer, wine and sparkling wines, given that 
enormous quantities would have to be stored at special 
temperatures and in particular environments. Another 
system should therefore be devised even though it would 
certainly not be easy to bring it into play. The Com­
mission has not yet proposed any such system. 
3. Specific comments 
3.1. Article 1 of the proposed Directive should stipu­
late that the full standardization of excise duties is to 
be completed in stages. 
This requirement could include the introduction of 
provisions and derogations making it possible, at least 
for some Member States, to achieve full alignment after 
31 December 1992. 
3.2. It is still possible that 'bands', rather than stan­
dard rates, may be proposed as they have been for 
VAT. 
3.3. The proposed rate of excise duty on alcohol 
(Art. 4) is too high. In four Member States it would 
put the price of the products concerned beyond the 
reach of the average consumer. The sharp rise would 
also work in favour of the most expensive products 
where the effect of taxation on price is limited. Further­
more, it is inappropriate to adopt an arithmetic average 
for spirits when the Commission has abandoned this 
approach for wine and beer. 3.4. The reduced rate proposed in Article 4 (2) for 
undenatured alcohol contained in perfumes and cos­
metics is justifiable since the Commission does not 
intend to introduce excise duties on the products them­
selves. All the Commission proposes to do is tax the 
alcohol contained in the products. Denatured ethyl 
alcohol should be exempt in keeping with the Explana­
tory Memorandum (1). Reduced rates of excise duty 
should also apply to alcohol used as a solvent for 
flavours to facilitate its use and hence avoid replace­
ment by isopropyl alcohol owing to the high cost of 
ethyl alcohol where it is subject to excise duty. 
This exemption should not be thwarted by the lack of 
harmonization of national methods of denaturing. 
Mutual recognition of denaturing methods could be 
envisaged in this connection, at least as a first stage. 
3.5. The proposed common rate of excise duty on 
intermediate products (Art. 5) is based on the principle 
of taxation by reference to volume. The rate is, by and 
large, calculated on the basis of the weighted averages 
of the rates currently applicable in the Member States. 
In general the Section approves this approach, taking 
into account the Commission's proposed definition of 
intermediate products set out in its previous proposals 
on the harmonization of excise duties; these proposals 
were approved by the Committee on 31 October 1985 
with one or two reservations {cf. CES No 984/85, 
paragraphs 1.5 et seq.). 
In this context it is important to remember that inter­
mediate products are normally obtained from the basic 
product which is partially fermented must or wine 
representing at least 75% of the final product. The 
proposed excise duty for intermediate products is there­
fore based on the fact that the starting point is a 
fermented product (wine from grapes or their viticul-
tural equivalents and/or wine from fruit) to which is 
added distillation alcohol in such a quantity and such 
a way that the product retains the character of a fer­
mented beverage [cf. doc. COM(85) 151, Article 2]. 
It is also important to remember that many of these 
products, which are basically made up of wine (port, 
sherry, Madeira, Samos, vins doux naturels (fortified 
wines), vermouth, Vernaccia di Oristano, Marsala, Pas-
sito di Pantelleria, Vin Santo toscano, Mantilla, Maril-
es, Malage dulce), have great traditions, are particularly 
important for the wine-growing countries of the Medi­
terranean and in some regions constitute the most 
important agricultural resource (e.g. port and sherry). 
0) OJ No C 250, 18 9. 1987, p. 4, point V. 
12. 9. 88 Official Journal of the European Communities No C 237/39 
For this reason the taxation levied on products derived 
from fermentation and. basically consisting of wine 
needs to be very light. 
3.6. The provisions of Articles 6 and 7 cannot be 
accepted in their present form. 
With regard to wine, the Section would reiterate the 
importance of not further reducing the consumption of 
this surplus agricultural product, a point made with 
clarity in the ESC's Opinion on the implementation 
of agricultural stabilizers of 27 January 1988 (CES 
No 83/88, p. 6, point 2.9). 
3.7. Taxing sparkling wines differently from still 
wines would make no sense, since the*e is no difference 
between the two types of wine either in terms of 
alcoholic strength (indeed, still wines generally contain 
more alcohol than sparkling wines) or in terms of value 
(at least with some qualities). The sole difference lies in the added value, and that is determined by the labour 
input. 
4. Final comments 
4.1. The approximation of excise duty on alcohol 
and alcoholic beverages is a particularly complex matter 
which the Commission would have done well to study 
in greater depth. 
4.2. It is absolutely vital to consult all EC Member 
States so that a proposal can be arrived at which, if not 
meeting with everyone's full approval, at least carries 
greater credibility for all concerned. 
4.3. In particular, it is worth considering the impact 
of the proposal on Member States' tax revenue and 
attempting to forecast how trade will change as a result 
of the completion of the Single European Market. 
Done at Brussels, 7 July 1988. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
APPENDIX 1 
to the Opinion of the Economic and Social Committee 
The following members, present or represented, voted for the Opinion: 
Mr/Miss/Mrs: Aparicio-Bravo, Arets, Ataide, Beltrami, Bento-Goncalves, Beretta, Broicher, Lobo-Brandao 
R. Cal, Calvet-Chambon, Campbell, Cavazzuti, Ceyrac, Collas, Alves-Conde, Cortois, van Dam, Delhomeme, 
Delia Croce, Dodd, Donck, Dos Santos, Drilleaud, van Eekert, Eulen, Flather, Flum, Frandi, Fresi, Gardner, 
Gayetot, Geuenich, Glesener, Gomez-Martinez, Green, Hilkens, Houthuys, Horsken, Jaschick, Kaaris, Kirch-
feld, Kroger, Lojewski, Low, Meyer-Horn, Morales, Muhr, Neto da Silva, Nierhaus, Nieuwenhuize, Noord-
wal, de Normann, Orsi, Pardon, Pelletier, Petersen, Poeton, Proenca, Proumens, Ribiere, Riera-Marsa, 
Robinson, Rolao-Goncalves, Rouzier, Saiu, Salmon, Salomone, Schade-Poulsen, Schmitz, Schopges, Silva, 
Solari, Spijkers, Stadelin, Tukker, Vercellino, Vidal, Wagner, Wick, Whitworth, Zufiaur-Narvaiza. 
The following Members, present or represented, voted against the Opinion: 
Mr/Miss/Mrs: Aspinall, Boddy, Carroll, Christie, Dunet, Etty, Hancock, Moreland, Murphy, Pronck, Speirs, 
Tamlin, Tixier. 
The following Members, present or represented, abstained: 
Mr/Miss/Mrs: Coyle, Giacomelli, Martin-Almendro, Pearson, Rea, Roseingrave. 
No C 237/40 Official Journal of the European Communities 12. 9. 88 
APPENDIX 2 
to the Opinion of the Economic and Social Committee 
In the course of the discussions the following amendments, which received at least one quarter of the total 
votes cast, were rejected: 
Point 2.10. 
Amend to read as follows: 
'Wine should logically therefore be exempted from excise duties. This would have to lead to the exemption 
of beer in order to ensure fair competition and because, like wine, it forms part of the normal everyday diet 
in many Member States. Nevertheless, unless some special measures are taken, this will greatly affect the 
competitive position of distilled products, with consequent effects on employment in certain disadvantaged 
regions. Consequently doubts must arise as to whether any level of rates can be set that will not distort 
competition.' 
Reason 
The effect on workers in the spirits industry must not be ignored. Several thousand jobs could be threatened 
in Scotland and other regions of the Community where opportunities for other employment would be limited. 
Results of voting 
Votes in favour: 34, Votes against: 46, Abstentions: 2. 
Page 5 
Add the following paragraph at the end of point 3.5: 
'Nor is it understandable why alcoholic beverages with the same strenght as intermediate products (particularly 
aperitifs based on gentiana) are not to be taxed at the same level. This could be done by reducing the taxation 
on the initial alcoholic content (the first 10 or 12 degrees could be taxed like wine).' 
Reason 
Self-explanatory. 
Results of voting 
Votes in favour: 25, Votes against: 61, Abstentions: 6.