COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 92/83/EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages
Date: 2018-05-25
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: alcohol, approximation of laws, beer, beverage industry, chemical alcohol, cider, ethanol, excise duty, tax harmonisation, tax relief

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 25.5.2018 SWD(2018) 259 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a Council Directive  amending Directive 92/83/EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages {COM(2018) 334 final} - {SEC(2018) 254 final} - {SWD(2018) 258 final}  
 
 
 
 
 
CONTENTS 

1. 

Introduction and Context .......................................................................................................... 3 

1.1. 

Introduction ................................................................................................................................3 

1.2. 

Scope for reforms .......................................................................................................................4 

2.  What is the problem and why is it a problem? ......................................................................... 4 

2.1. 

Introduction ................................................................................................................................4 

2.2. 

Scope of the problems................................................................................................................5 

2.3. 

Problem 1 - Dysfunctions in the application of exemptions for denatured alcohol ..................5 

2.4. 

Problem 2 – Dysfunctions in the classification of certain alcoholic beverages ..........................9 

2.5. 

Problem 3 – Dysfunctional application of reduced rates ........................................................ 17 

2.6. 

Problem 4 – Unclear provisions to measure the Plato degree of sweetened / flavoured beer22 

2.7. 

Conclusion ............................................................................................................................... 25 

3.  Why should the EU act? ......................................................................................................... 25 

4.  What should be achieved? ...................................................................................................... 26 

4.1. 

General objectives ................................................................................................................... 26 

4.2. 

Specific objectives ................................................................................................................... 27 

5.  What are the various options to achieve the objectives? ........................................................ 27 

5.1. 

Link between problems/drivers and options .......................................................................... 27 

5.2. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 30 

5.3. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 32 

5.4. 

Dysfunctional application of reduced rates ............................................................................ 36 

5.5.  Measurement of Plato degree for sweetened / flavoured beer ............................................. 37 

6.  What are the impacts of the different policy options and who will be affected? ................... 39 

6.1. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 40 

6.2. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 41 

6.3. 

Dysfunctional application of reduced rates ............................................................................ 44 

6.4.  Unclear provisions to measure of Plato degree for sweetened / flavoured beer .................. 47 

7.  How do the options compare? ................................................................................................ 49 

7.1. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 49 

7.2. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 51 

7.3. 

Dysfunctional application of reduced rates ............................................................................ 56 

7.4.  Unclear provisions to measure Plato degree for sweetened / flavoured beer ....................... 59 

7.5. 

Summary of preferred package of options ............................................................................. 61 

8.  REFIT (simplification and improved efficiency) ................................................................... 63 

8.1. 

Context, methodology and constraints ................................................................................... 63 

9.  How would actual impacts be monitored and evaluated? ...................................................... 66 

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ABBREVIATIONS 

Actual Alcoholic Strength by Volume 
Alcohol as a Flavour-Carrier 
Aromatised Wine Products 
Binding Tariff Information 
Completely Denatured Alcohol 
Court of Justice of the European Union 
Combined Nomenclature 
Combined Nomenclature Explanatory Note(s) 
Excise Movement and Control System 
Excise Product Code 
Ethyl Alcohol 
European Union 
Fiscalis Project Group 
Hectolitre 
Intermediate Products 
Indirect Tax Expert Group 
Million 
Member State(s) 
Other Fermented Beverages  
Open Public Consultation 
Partially Denatured Alcohol 
Regulatory Fitness and Performance Programme 
Small and Medium-sized Enterprise 
Treaty on the Functioning of the European Union 
World Health Organisation 

ABV 
AFC 
AWP 
BTI 
CDA 
CJEU 
CN 
CNEN 
EMCS 
EPC 
ET 
EU 
FPG 
hl 
IP 
ITEG 
mn 
MS 
OFB 
OPC 
PDA 
REFIT 
SME 
TFEU 
WHO 

2 

 
 
 
 
 
 
1. 

INTRODUCTION AND CONTEXT 

1.1.  Introduction 

The  European  Commission  is  committed  to  preventing  trade  distortions  in  the  single  market, 
ensuring  fair  competition  between  businesses,  and  reducing  administrative  burdens  and 
compliance costs for businesses and tax administrations. The launch of the single market resulted 
in the abolition of tax controls at the borders between Member States (MS) and the adoption of 
common  rules  for  excise  products,  including  alcohol,  to  facilitate  cross-border  trade  and  to 
prevent competitive distortions. 

Excise duties for alcohol are regulated through two directives: 

  Directive  92/84/EEC1  on  the  approximation  of  the  rates  of  excise  duty  on  alcohol  and 

alcoholic beverages sets out the minimum rates of excise duty on alcohol products.  

  Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 
sets out the common rules on the structures of excise duty applied to alcohol and alcoholic 
beverages. This directive defines and classifies the different types of alcohol and alcoholic 
beverages, according to their characteristics, and provides a legal framework for reduced 
rates, exemptions and derogations in some sectors.  

In  addition  to  these  directives,  Directive  2008/118/EC2  sets  out  the  common  provisions,  which 
apply  to  all  products  subject  to  excise  duties.  This  directive  is  currently  under  review  in  a 
separate proposal. Furthermore, businesses must adhere to other EU legislation, which regulates 
areas such as product definitions, labelling etc.  

Both alcohol Directives have failed to keep pace with developments including inflation. In 2006 
in response to a request from Council, the Commission proposed to amend the minimum rates as 
set  out  in  Directive  92/84/EEC.  The  proposal  fell  short  of  the  necessary  unanimity  and  was 
withdrawn in 2015 by the Commission.  

Since the adoption of Directive 92/83/EEC in 1992, the first and only evaluation of the Directive 
was in 2014. This Directive has not kept pace with the challenges and opportunities offered by 
new technologies and developments within the alcohol industry. The Directive was identified by 
the  Commission  for  a  retrospective  evaluation  under  the  Commission’s  Regulatory  Fitness  and 
Performance  Programme  (REFIT).  One  of  the  objective  was  to  identify  weaknesses  in  the 
legislative  environment  caused  by  the  Directive  resulting  in  negative  consequences  for  the 
stakeholders  (e.g.  obstacles  to  the  functioning  of  the  internal  market,  competitive  disruptions, 
administrative and compliance costs, etc.)  

This  impact  assessment  intends  to  ensure  that  the  future  proposal  is  cognisant  of  previous 
experiences and in particular identify any areas where the regulatory framework can be improved 
to bring benefits to businesses, MS and citizens. While a proposal to amend Directive 92/84/EEC 
may  reduce  the  incentive  for  tax  evasion  and  positively  impact  on  public  health,  this  impact 
assessment will not focus on this due to the limited support of stakeholders and the Commission's 
prior  experience  in  proposing  an  amendment  to  this  Directive.  Furthermore  this  proposal  will 
focus solely on requirements imposed by tax legislation and not sector / industry requirements. 

1 

Council Directive 92/84/EEC of 19 October 1992 on the approximation of the rates of excise duty on alcohol and alcoholic 
beverages, OJ L 316, 31.10.1992, p.29. 

2   Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and 

repealing Directive 92/12/EEC, OJ L 9, 14.1.2009, p.12-30. 

3 

 
 
 
                                                 
1.2.  Scope for reforms 

To  support  the  REFIT  evaluation,  an  independent  study  was  carried  out  in  2014/2016  by  a 
consortium led by Ramboll Management Consulting (hereinafter the ‘Ramboll Evaluation’).3 The 
recommendations  and  findings  of  the  Ramboll  Evaluation  were  taken  into  account  in  the 
Commission’s  report  submitted  to  the  Council  in  October  20164.  According  to  this  Report,  the 
Directive has proven to be effective and generally appropriate for the collection of excise duties.  

Nevertheless  some  problems  have  been  identified  and  inefficiencies  persist  causing  possible 
distortions of the internal market. The large variation in duty levels between MS5, which provides 
a strong incentive for tax evasion, and other weaknesses in the design of the tax necessitate the 
use of burdensome administrative procedures for both tax administrations and businesses. These 
increased  administrative  and  compliance  costs  for  businesses  restrict  the  participation  of  small 
and medium-sized enterprises in intra-EU trade in alcohol and alcoholic beverages.  

In  December  2016,  Member  States  unanimously  supported  the call to  review the Directive and 
the Council subsequently adopted Council Conclusions (see Annex 5), asking the Commission to 
carry out the necessary studies and consultation to submit a proposal for revision. In March 2017, 
the Inception Impact Assessment6 on a possible revision of the Directive was published, and laid 
down  the  problem  areas  to  be  assessed  and  a  preliminary  set  of  potential  policy  options.  A 
grouping  led  by  Economisti  Associati  s.r.l.  (EA)  and  including  the  Centre  for  European  Policy 
Studies  (CEPS),  CASE  -  Center  for  Social  and  Economic  Research,  wedoIT-solutions  GmbH, 
and  ECOPA  undertook  the  assignment  titled  “Study  on  Council  Directive  92/83/EEC  on  the 
structures of excise duty on alcohol and alcoholic beverages” (“the Study”). The Study analysed 
the  scale  of  the  problems  identified  in  the  Ramboll  evaluation,  assessed  their  evolution  and 
assessed the impacts of possible options to address the problems identified. 

2.  WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? 

2.1.  Introduction 

As noted above, the Ramboll Evaluation found that the Directive has proven to be effective and 
generally appropriate for the collection of excise duties. However some problems were identified 
and  inefficiencies  persist.  These  findings  are  evident  by  the  frequent  queries  from  MS  and 
businesses,  Indirect  Tax  Expert  Group  (ITEG)  and  Committee  for  Excise  duties  (ExComm) 
agendas, complaints against the Commission and the existence of the Fiscalis Project Group 013 
on arrangements for taking forward the work on completely and partially denatured alcohol. 

The  problems  touch  upon  the  following  4  areas:  (i)  Exemptions  for  denatured  alcohol,  (ii) 
Classification  of  certain  alcoholic  beverages,  (iii)  Reduced  rates  for  small  producers  and  low 
strength alcoholic beverages, and (iv) Measurement of Plato degree of sweetened/flavoured beer. 
The problem areas are very distinct from each other, which has an impact on the structuring of 
the analysis presented in this report. There is no uniform and homogenous market for alcohol and 
alcoholic beverages; the markets for specific beverages or other alcoholic products are generally 
not  competing  against  each  other,  follow  specific  sectorial  regulations  and  requirements,  and 
exhibit  specific  problems.  There  are  at  the  same  time  issues  with  the  functioning  of  Directive 
92/83/EEC which are of horizontal nature, such as the classification problems.  

3 

4 

5 
6  

Ramboll  Management  Consulting,  Coffey,  Europe  Economics,  “Evaluation  of  Council  Directive  92/83/EEC  on  the 
harmonisation of the structures of excise duties on alcohol and alcoholic beverages”, 2016 
'Report from the Commission to the Council on the evaluation of Council Directive 92/83/EEC on the structures of excise 
duties on alcohol and alcoholic beverage', Brussels, 28.10.2016, COM (2016) 676 final. 
Council Directive 92/84/EEC sets the minimum rates of excise, which is not within the scope of this document. 
'Inception Impact Assessment on the Structures of excise duties on alcohol and alcoholic beverages', 01.03.2017 

4 

 
 
                                                 
All  of  the  problem  areas  require  dedicated  scope  of  analysis.  The  drivers  behind  each  of  the 
problems areas are problem-specific and so are, mostly, the consequences. As a result, also the 
objectives are drawn up in such a way that they correspond only to specific problems/drivers (see 
section 4). Acknowledging the complexity of the issues at stake and their analysis, Figure 2 offers 
an  overview  of  the  intervention  logic  behind  the  initiative,  guiding  the  reader  through  the 
analysis.  

Furthermore, it should be noted that some of the problem areas impact specific stakeholders only, 
who  have  learned  for  the  main  to  work  within  the  current  legislative  framework.  The  general 
muted response can be attributed in part to the perceived risks of amending a Directive that is 25 
years old, the risk of positive rates for some products and also to the fact that the problem may 
not impact the stakeholder in any event. Contrary to the apparent lack of interest of stakeholders, 
this reluctance cannot be generalised and Member States unanimously supported a proposal for 
an amendment to the Directive.  

2.2.  Scope of the problems 

The Ramboll evaluation and the Study took a broad approach to the possible problems, identified 
through various sources, with the functioning of Directive 92/83/EEC. Follow-up analysis of both 
studies  resulted  in  a  conclusion  that  not  all  of  the  aspects  of  the  problematic  areas  merited  EU 
action. The excise duty exemption for private production of fermented beverages (i.e. beer, wine 
and  other  fermented  beverages  (OFB))  for  home  consumption,  which  was  reviewed  in  both 
studies, will not be further considered in this impact assessment. The reasons behind this decision 
are explained in detail in Annex 16.  

The  following  problem  tree  outlines  the  problems,  the  drivers  and  their  consequences  of  the 
problematic areas retained for further analysis in this impact assessment. 

Figure 1 –the problem tree  

2.3.  Problem 1 - Dysfunctions in the application of exemptions for denatured alcohol 

Overall, the Study  suggests  that the EU regulatory  framework  for exempting denatured alcohol 
from  excise  duty  works  relatively  well.  The  original  objective  behind  the  provisions  –  that  of 
ensuring  fair  competition  between  businesses  -  was  found  to  be  still  relevant.  However,  it  is 
evident (inter alia from the frequent discussions within the ExComm, the ITEG and the Fiscalis 

5 

 
 
 
 
 
Project  Group  dating  back  to  2008)  that  the  provisions  in  Art.  27  of  the  Directive  concerning 
denatured alcohol are not phrased in a completely clear and unambiguous way, which has given 
rise  to  uncertainties  and  disputes,  especially  when  denatured  alcohol  is  moved  across  borders 
between  MS  whose  interpretation  of  the  applicable  rules  differ.  The  original  intention  of  the 
provisions  for  exemption  of  denatured  alcohol  and  in  particular  the  differentiation  between  the 
exemption under Article 27.1 (a) and 27.1 (b) is no longer met under the current interpretation. 
Some of these uncertainties have non-negligible cost implications for producers and/or users of 
denatured alcohol, and can inhibit intra-EU trade in denatured alcohol. 

Art. 27 stipulates that alcohol shall be exempted from excise duty if it has been denatured (i.e. the 
addition of certain substances to make it unfit for human consumption). It distinguishes between 
‘completely’  denatured  alcohol  (CDA),  for  which  there  is  a  system  of  mutual  recognition  of 
national  denaturing  formulations  to  ensure  it  can  be  traded  freely  throughout  the  EU,  and  so-
called ‘partially’ denatured alcohol (PDA), for which the exemption is conditional on its use for 
the manufacture of any product not destined for human consumption, and MS are free to define 
their own national procedures. 

CDA is predominantly used for industrial use, whereas PDA is used for products not intended for 
human  consumption  but  for  which  the  rules  on  CDA  are  not  suitable  (i.e.  because  the 
intentionally  strong  smell  of  CDA  means  it  cannot  be  used  in  perfumes  or  its  tasting  agents 
cannot  be  used  with  products  that  come  into  contact  with  the  mouth,  etc.).  Examples  of  such 
products  include  cosmetics,  perfumes,  inks,  screenwash  and  anti-freeze,  detergents,  paints  and 
coatings, as well as biofuels, which account for the largest proportion by far.  

The  key  drivers  of  the  problem,  which  are  discussed  in  Annex  6,  are  (i)  an  incomplete  / 
inconsistent  mutual  recognition  of  CDA  between  the  MS,  (ii)  divergent  national  approaches  to 
PDA,  (iii)  divergent  interpretations  of  certain  terms  related  to  PDA,  and  (iv)  potential  for 
fraudulent use of denatured alcohol. 

2.3.1.  Consequences: who is affected and how? 

Member States authorities 

Fiscal  fraud  with  denatured  alcohol  is  estimated  to  result  in  lost  tax  revenues  in  the  region  of 
EUR 150-200 million per year across the EU (the bulk of which is in Central / Eastern MS). The 
World  Health  Organization  (WHO)  has  published  estimates  that  around  17%  of  all  alcohol 
consumed  in  Europe  in  2010  was  unrecorded.  The  estimated  proportion  of  unrecorded  alcohol 
(based  on  data  from  the  Commission's  excise  duty  tables  (EDT),  2016)  ranges  from  as  little  as 
3% (FR) to over 20% (RO). Box 1 illustrates the scale of the tax revenues lost in PL.  

Box 1 - Estimating fraud with surrogate alcohol in Poland 

The WHO estimates the consumption of illicit alcohol in PL to be about 1.6 litres of pure ethanol pp/year (13% of 
total consumption). According to interviewees, the illicit alcohol is predominantly spirits (ethyl alcohol), its total 
legal  consumption  is  about  120  million  litres  of  pure  ethanol/year.  A  project  carried  out  in  2012  by  the  Polish 
Spirits Industry in  cooperation with  the  Ministry  of  Finance found  that,  between 2009  and 2011,  the  majority  of 
illicit  spirits  (7  out  of  a  total  of  12  million  litres  of  pure  alcohol/year)  consumed  in  Poland  were  derived  from 
decontaminated/purified  industrial  alcohol.7  Based  on  the  current  excise  duty  and  exchange  rates,  this  would  be 
equivalent to just under EUR 95 million of excise duty lost per year (or approx. 6% of the total excise duty receipts 
from  ethyl  alcohol).8  Whether  this  is  a  realistic  estimate  depends  on  who  is  asked:  while  the  authorities  in  PL 
estimate that the consumption of illicit alcohol has fallen to around 5% of the total recently (meaning this type of 
fraud  is  responsible  for  around  EUR  50  million  of  lost  revenue/year),  some  industry  representatives  reckon  the 

7 
8 

Based on OECD, ‘Illicit Trade: Converging Criminal Network. The size, impacts and drivers of illicit trade in alcohol’, 2016 
Calculations based on data from the Commission’s excise duty tables (2016). 

6 

 
 
                                                 
market share of illicit spirits in PL is closer to 20% (equalling approx. EUR 200 million per year of lost revenue). 
Source: EA, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages", 2017 

A minority of MS also indicated they felt that the existence of various denaturing methods across 
the  EU  made  it  “particularly  difficult”  for  their  administration  to  monitor  and  control  of  the 
production and/or movement of denatured alcohol. This was mainly due to a lack of knowledge 
of the different denaturing formulations used by other MS, resulting in a burden on the time and 
resources available for analysis in the laboratories.  

According  to  the  CZ  and  PL  authorities  alcohol  can  account  for  between  25  –  50  %  of  their 
customs  laboratories'  workloads.  Recently  their  laboratories  have  analysed  several  hundred 
samples of  denatured alcohol. As a sample can  be denatured using one of the many denaturing 
formulations, the list of ingredients to be checked can vary substantially in each sample making it 
impossible to establish chemical algorithms. However, only a minority of these samples contain 
(cleaned  up)  denatured  alcohol  of  unknown  origin.  In  these  cases,  testing  these  samples  can 
reportedly be extremely time and labour intensive i.e. take several days and cost up to EUR 1 000 
in staff time and materials. Assuming 500 samples are analysed each year and approximately 5 % 
of these are difficult cases, the estimated total annual cost for an administration is approximately 
(a maximum of) EUR 25 000.  

Finally  as  described  under  the  drivers,  the  different  approaches  to  PDA  lead  to  the  legal 
uncertainty and  legal proceedings, which have  costs for both  tax authorities and businesses.  In 
the context of the Ramboll evaluation Member States highlighted the need for clear rules on the 
exemption of denatured alcohol. One MS noted that the "definitions of rules at this [EU] level is 
of  utmost  necessity,  otherwise  each  MS  will  have  its  own  system,  according  to  its  national 
interests, and that will only complicate matters." 

Businesses 

The different procedures and regimes in each MS as regards CDA make cross-border trade more 
difficult  and  can  create  competitive  advantages  to  some,  particularly  in  the  cross-border 
movement of CDA or imports from third countries. However, since extra-EU imports are subject 
to an import tariff of EUR 10.2/hl, and the value of all imports of denatured alcohol into the EU 
amounts  to  approx.  EUR  20  million/year  of  which  CDA  accounts  for  a  small  fraction,  no 
stakeholders consulted raised competition from third countries as a substantial concern either9. It 
therefore seems that it remains more a potential risk than a manifested distortion.  

Nevertheless, there appears to have been a perceptible hindrance and cost associated with moving 
CDA cross-borders, as reported by OPC respondents. 9 (24) businesses indicated that they, and/or 
a  company  that  they  had  done  business  or  were  in  direct  contact  with,  had  incurred  additional 
costs and burdens because alcohol recognised as CDA in one MS was not recognised as such in 
another MS, on one or more occasions. A further 8 respondents noted that alcohol was recognised 
as  CDA  after  a  delay. 7  respondents  indicated that  they  or another  company  had  chosen  not  to 
import/export CDA from/to another MS because of the risk it would not be recognised as such.  

With regard to the administrative burden, in general, the main concern of the economic operators 
was  linked  to  the  specific  requirements  regarding  supervision  of  production  and  movement  in 
some MS that cannot be directly linked to  the provisions of the Directive, and which  represent 
these MS’ national-level response to their estimations of the risk of fraud. 

9   Only 4 out of 21 OPC respondents  indicated they or another company had chosen to purchase CDA from a third country, 

rather than from an MS, because it was subject to more lenient rules. 

7 

 
 
                                                 
With  regard  to  the  different  national  approaches  to  PDA,  while  producers  noted  that  intra  EU 
trade  in  PDA  is  possible  and  does  happen,  the  investment  required  (i.e.  purchase  of  storage 
facilities, setting up and maintaining tax warehouses) is likely to prevent many. Furthermore the 
cost  of  understanding  and  complying  with  the  applicable  rules  in  the  different  MS  hampers 
smaller  businesses  in  cross-border  trade.  For  example  in  the  CZ  the  financial  guarantee  is 
approximately EUR 10/L of alcohol. Interviewees in PL noted that it was common for users of 
PDA  to  have  a  full-time  member  of  staff  dedicated  entirely  to  ensuring  compliance  with  the 
regulatory framework, and companies prefer to use CDA wherever possible to avoid the burdens 
associated with using PDA. Large specialised companies for whom alcohol is a key product often 
find it economical to make this investment (no detailed cost estimates were available). 

In  addition  to  the  costs  of  complying  with  the  supervisory  regimes  and  providing  the  required 
information  to  national  authorities,  there  can  also  be  other  operating  costs  that  arise  from  the 
different procedures in different MS. For example, cosmetics companies in some MS have access 
to  a  much  wider  range  of  PDA  formulations  and  production  procedures  (including  in  situ 
denaturation) than other MS. This can mean that the manufacture of certain products is possible 
to a higher standard and/or at lower costs in certain MS. 

Multinational  companies  may  be  able  to  take  advantage  of  such  differences  and  locate  the 
production of certain goods in the MS that offer the most favourable conditions as regards PDA 
formulations  and  related  factors.  However,  there  are  also  instances  where  multinationals 
companies in several MS claim to incur additional costs, as they need to adapt the formulations 
and  production  processes  for  otherwise  identical  products  containing  alcohol  to  the  respective 
national PDA rules. The costs arising from the national regulatory frameworks vary significantly 
from MS to MS, from sector to sector, and even from company to company, and would therefore 
be very difficult to estimate comprehensively. In any case, the costs arising from these aspects are 
not attributable to the Directive, but to national implementing rules.  

In response to the OPC, 57% of respondents indicated that they or a company they had contact 
with had incurred additional costs to understand the legal situation as regards the applicable rules 
and procedures for PDA when moved from / to another MS. 68% indicated that they had incurred 
additional costs / administrative burdens to ensure that PDA using a formulation accepted in one 
MS was also recognised as such in another MS. 39% of respondents had to pay excise duty on 
denatured  alcohol  because  a  MS  did  not  recognise  the  procedure  by  which  it  was  denatured  in 
another MS and 48% of respondents chose not to import or export PDA due to risk it would not 
be  accepted  as  PDA.  No  specific  estimates  or  evidence  was  provided  by  the  MS,  which  most 
likely  stems  from  the  fact  that  the  administrations  or  companies  do  not  keep  such  readily 
available statistics and disaggregating from other data is difficult. In the context of the Ramboll 
evaluation,  one  producer  described  a  situation  where  a  commitment  had  been  made  with  a 
customer  for  the  use  of  a  specific  denaturant.  The  authorities  subsequently refused  to  authorise 
this  formulation  but  the  producer  was  contractually  bound  to  produce  the  alcohol  without  an 
excise duty exemption. 

With  regards  to  the  lack  of  clarity  around  the  terms  Art.  27  (1)  (b)  and  the  diverging 
interpretations of the term 'used for the manufacture of' the different interpretations by different 
MS, sometimes even by different customs offices within a given MS, of what does and does not 
constitute  a  finished  product  lead  to  legal  uncertainty  for  businesses  and  costs  (if  the 
classification  is  challenged).  Some  businesses  (47%)  reported  having  experience  of  such 
situations, but were not able to specify costs, and stated the issue was eventually resolved to their 
satisfaction  (in  one  case  via  a  BTI).  In  MS  where  the  exemption  is  not  applied,  the  businesses 
may  have  to  incur  additional  costs  for  purchasing  and  storing  CDA  in  addition  to  PDA.  The 
majority of stakeholders (76%) involved in the production or end-use of industrial alcohol stated 
that they have encountered issues with different interpretations. 

8 

 
 
Consumers/Citizens 

Apart  from  the  lost  tax  revenue,  the  resulting  reduced  funding  for  public  services  and  other 
negative effects of criminal activity on society, the other main concern in relation to the effects of 
this fraud is public health. There is at least one known recent case in the UK where anti-freeze 
containing  denatured  alcohol  seems  to  have  been  used  to  manufacture  illicit  vodka.  The 
consumption  of  denatured  alcohol  is  also  evident  in  LT,  where  it  is  commonly  known  that 
mouthwash  is  sold  to  individuals  for  consumption  as  alcoholic  beverages.  The  Polish  National 
Health Fund data show an average of around 200 hospital admissions, and around 50 deaths due 
to glycol (alcohol) poisoning per year in PL.  

2.3.2.  How will the problem evolve (baseline scenario)? 

Approx. EUR 3-3.5 billion worth of denatured alcohol is used annually in the EU for a variety of 
industrial purposes. It is estimated that more than 95% of the total consumption is PDA, although 
CDA accounts for a significant share of the market in certain MS and sectors.  

With  the  adoption  of  Regulation  2017/2236  and  the  entry  into  force  of  the  new  list  of  CDA 
formulations, 25 MS recognise the Eurodenaturant as the only denaturing formulation, with only 
3  MS  (CZ,  SE,  UK)  recognising  different  concentrations  of  the  same  ingredients.  In  addition, 
from 2019, when the authorisation of the remaining FI formulation expires, only 2 MS (CZ, EL) 
will still be using national formulations containing different denaturants. This greatly reduces, but 
does not completely eliminate, the scope for problems arising from the manifestly unclear rules 
on recognition of CDA formulations stipulated in Art. 27(1)(a) of the Directive. Still, it should be 
noted that the Directive in its current form allows MS to re-introduce national CDA formulations, 
if they wish to in the future. While this seems unlikely, it cannot be ruled out, especially if issues 
with the Eurodenaturant were to come to light. 

In  any  case,  if  one  considers  that  a  system  is  only  as  strong  as  its  weakest  link  (as  CDA  can 
circulate  freely  across  the  EU,  and  fraudsters  would  tend  to  use  the  “weakest”  formulation 
available),  then  the  fact  that  many  MS  have  replaced  their  national  formulations  with  the 
Eurodenaturant  should  reduce  the  risk  of  fraud  with  CDA  overall.  It  is  impossible  to  predict  if 
this will result in a reduction of fraudulent activity or in a displacement of fraud towards PDA. 

The  proliferation  of  national  approaches  to  PDA  will  continue.  It  could  possibly  intensify  for 
biofuels,  which  accounts  for  the  largest  proportion  of  PDA  as  the  future  market  evolution  of 
biofuels  is  dependent  on  the  direction  of  renewable  energy  policy  in  Europe.  No  changes  are 
expected in relation to the divergent interpretations related to PDA and the uncertainty for cross-
border trade will continue.  

2.4.  Problem 2 – Dysfunctions in the classification of certain alcoholic beverages 

2.4.1.  The problem and its EU dimension 

Alcoholic  beverages  are  defined  and  categorised  at  multiple  levels  and  for  different  purposes. 
These  different  layers  only  partly  coincide  and  this  lack  of  coherence  seems  the  single  most 
significant  cause of all classification issues. The excise  duty classification is  determined by the 
five  harmonised  tax  categories  established  in  the  Directive,  which  are  defined  primarily  with 
reference to the Combined Nomenclature (CN) headings. See Annex 7 for details. 

The  classification  dysfunctions,  which  can  be  subdivided  into  two  key  areas  which  exhibit 
distinct  characteristics  (and  drivers)  while  sharing  most  of  the  adverse  effects:  (i)  interaction 
between  fiscal  and  customs  classification  and  (ii)  definition  and  classification  of  certain  non-
standard  products  not  explicitly,  or  imprecisely,  foreseen  in  the  Directive.  The  Ramboll 

9 

 
 
evaluation recalled approximately 70 different cases of products “difficult to classify”, spanning 
a majority of MS.  

Interaction between fiscal and customs classification 

The Directive defines the categories of alcoholic products subject to harmonised excise duty in 
accordance  with  their  customs  classification.  The  correspondence  between  the  fiscal  categories 
and  the  CN  codes  is  however  not  straightforward.  Within  the  EU,  classification  uncertainties 
have  lead  to  disparities  of  treatment  across  MS  and  between  similar  products,  due  to  different 
criteria used to determine the essential fermented character of certain beverages. The level of the 
legal  uncertainty  that  may  derive  from  the  above  classification  issues  is  connected  primarily  to 
the specificities of national markets, and the classification rules adopted. 

Under the current system the customs classification determines the excise duty category. Once a 
beverage  is  classified  as  CN  2208  it  can  be  taxed  only  under  Art.  20  (Ethyl  alcohol),  while  if 
classified as CN 2206 it may fall under Art. 12 (OFB) or 17 (IP) depending on its strength, but 
not under Art. 20 (unless it exceeds 22% vol., but there are no actual market incidences). Since 
the excise duty classification follows the CN classification, administrations have limited room for 
manoeuvre  in  applying  the  category  that  they  consider  appropriate  for  products  that  has  a  CN 
code  they  disagree  with.  In  principle,  tax  administrations  might  challenge  questionable  CN 
coding  decisions,  but  when  these  are  covered  by  a  Binding  Tariff  Information  (BTI)  issued  in 
another MS they generally opt to avoid disputes. The consequence is that similar products may 
end up being subject to different excise categories depending on the country of origin.  

The magnitude of the problem is reflected in the number of Court of Justice of the EU ("CJEU") 
rulings  on  the  classification  of  alcoholic  beverages,  which  captured  some  instances  of 
disagreements and disputes over the classification of products that took place in the various MS. 
In fact, especially where the matter is in the remit of  customs offices instead of tax offices, the 
disputes are reportedly settled through alternative methods: when a misclassification is detected, 
the  competent  administration  imposes  the  payment  of  a  certain  amount  of  tax  arrears 
(with/without  a  fine)  to  the  responsible  entity.  Businesses  prefer  this  procedure  rather  than 
opening  a  legal  case,  since  it  is  faster,  it  often  envisages  the  possibility  of  negotiations,  and  it 
does not imply public disclosure so the potential reputational effects are minimised. However, for 
this very reason precise figures on the frequency of administrative cases are not available.  

The  landmark  rulings  of  CJEU  (see  box  2)  established  the  possibility  of  classifying  dubious 
products and gave MS a tool to tackle opportunistic practices. On the one hand, the CJEU rulings 
effectively indicated how to interpret the old rules vis-à-vis new products, but on the other hand 
the  selection  criteria  remained  somehow  subjective  (taste,  smell,  appearance)  or  indefinite  (no 
specific thresholds or methods to determine the prevalent origin of the alcohol used). Therefore 
the  risk  of  disparities  in  the  application  of  these  criteria  across  national  administrations  persist, 
and the need for objective classification rules has possibly become even more pressing. 

Box 2 – Summary of CJEU landmark cases on the classification of alcoholic beverages 

Case  C-150/08  (‘Siebrand)  regarded  alcoholic  beverages  –  in  specific  the  three  beverages  ‘Pina  Colada’, 
‘Whiskey  Cream’  and  ‘Apfel  Cocktail’  –  with  a  cider  base  to  which  distilled  alcohol,  water,  sugar  syrup  and 
various additives had been added. The question was if these beverages may maintain the CN 2206 code – due to 
their cider base – or should be classified under CN 2208 as established by the Dutch customs. The Court ruled that 
when a fermented beverage loses the taste, smell and/or appearance of a beverage produced from a particular fruit 
or natural product, due to the above mentioned additions, it no longer falls under CN 2206, but CN 2208 applies.  

Case C-196/10 (‘Paderborner Brauerei’) concerned the fermented beverage ‘Salitos Ice’ and its ‘malt beer base’. 
The ‘malt beer base’ was produced from brewed beer with an alcoholic strength by volume of approx. 14%, which 
was  clarified  and  then  processed  with  ultrafiltration  techniques.  The  base  obtained  was  then  employed  for  the 
production of a light beer-based mixed drink. The question was if such a product had to be classified under CN 

10 

 
 
 
2203  or  2208.  The  Court  ruling  established  that  ‘a  liquid  described  as  a  “malt  beer  base”,    with  an  alcoholic 
strength  by  volume  of  14%,  obtained  from  brewed  beer  which  has  been  clarified  and  then  subjected  to 
ultrafiltration, by which the concentration of ingredients was reduced, must be classified under heading 2208”.  

The joined cases C-532/14 and C-533/14 ( ‘Toorank’) tackled the fermented beverage called ‘Ferm Fruit’ and a 
range of beverages with a ‘Ferm Fruit’ base to which other ingredients were added. Ferm Fruit was prepared using 
an alcohol resulting from the fermentation of fruit, which was then purified through ultrafiltration so that its smell, 
colour and taste resulted neutral. The question was if ‘Ferm Fruit’ (Question 1) and ‘Ferm Fruit-based beverages’ 
(Questions 2&3) had to be classified under CN 2206 or CN 2208. The CJEU ruled that ‘a beverage, such as Ferm 
Fruit,  which  is  obtained  through  fermentation  of  an  apple  concentrate  and  is  designed  to  be  consumed  either 
undiluted  or  as  a  base  in  other  beverages,  being  neutral  in  terms  of  colour,  smell  and  taste  as  a  result  of 
purification (including ultrafiltration) and having an alcoholic strength by volume, without the addition of distilled 
alcohol, of 16% falls under heading 2208 of that nomenclature’.  

Source: EA, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages", 2017 

Definition and classification of certain products 

Harmonised  EU  definitions  of  some  alcoholic  products  exist.  In  the  case  of  spirits,  this 
harmonised definition was developed to ensure, amongst other things, a systematic approach to 
spirits, to prevent the misuse of the terms and to protect the reputation of EU spirits10. However 
there is no harmonised definition of cider, perry and fruit wines in the Directive or in other EU 
legislation.  Both  in  the  CN  and  excise  classifications,  the  OFB  definition  is  less  strict  than  for 
other  alcoholic  beverages.  This  reflects  at  the  same  time  the  heterogeneity  of  the  products 
comprised  (e.g.  cider,  perry,  mead,  other  fruit-wines,  and  mixes),  the  variety  of  national 
production  practices  (‘cider’  designates  products  with  marked  differences  across  MS)  or 
commercial  designation  of  these  products  (e.g.  malt-based  alcopops,  'wine-coolers',  un-hopped 
flavoured  beer,  cider  and  fruit  wine  based  refreshers,  generic  low-strength  pre-mixes,  certain 
cream  liquors  and  other  flavoured  liquors,  etc.)  and  the  related  absence  of  harmonised  sectoral 
definition and rules that to the contrary exist for wine and spirits.  

Borderline products have been introduced to the market with the specific aim of being classified 
in  a  product  category  with  a  lower  excise  duty  rate  compared  to  competing  products.  Tax 
differentials vary and high differentials can be observed in MS with a zero rate on OFB. 

A report11 shows that certain products that in PL are classified as spirits are very similar to other 
products  that  other  MS  classify  as  OFB.  65%  respondents  experience  frequent  classification 
uncertainties and disputes within the pre-mixed drinks product group. 62% said uncertainties and 
disputes frequently occur with the category fermented alcohol pushed to 15-21% actual alcoholic 
strength  by  volume  (ABV)  industrially,  bottled  and  sold  to  look  like  its  equivalent  spirit,  on 
which a higher excise duty is due. 

This  favourable  tax  treatment,  combined  with  a  certain  flexibility  of  the  criteria  used  to  define 
this  category,  provided  in  the  past  an  incentive  for  the  development  of  various  new  products, 
based  on  novel  production  techniques,  arguably  designed  to  take  advantage  of  the  OFB  tax 
category  for  competition  purposes. In  the  absence  of  a  harmonised  definition,  a  number  of  MS 
have adopted national ad hoc measures for the tax treatment of OFB.  

10   Regulation  (EC)  No  110/2008  of  the  European  Parliament  and  of  the  Council  of  15  January  2008  on  the  definition, 
description,  presentation,  labelling  and  the  protection  of  geographical  indications  of  spirit  drinks  and  repealing  Council 
Regulation (EEC) No 1576/89, OJ L 039 13.2.2008, p. 16. 

11   Report prepared for the Polish Council of Wine by Parulski & Wspolnicy, 'Tariff and Excise Tax Classification of Fermented 

Beverages – Issues of Concerns', September 2016.  

11 

 
 
 
 
                                                 
A  final  element  of  the  classification  issue  relates  to  the  disparities  of  classification  of  certain 
flavoured  wine  and  OFB  to  which  minimal  amounts  of  alcohol  which  are  not  from  fermented 
origin  are added  as  a Flavour Carrier (AFC)  or for other  functional purposes.  According to the 
Directive, the alcohol contained in a product should be of “entirely fermented origin” in order to 
be  classified  as  wine  or  OFB.  However,  no  clarity  is  provided  by  the  Directive  for  products 
containing both alcohol from ''entirely fermented origin'' and ''non-entirely fermented origin'', and 
the some disparities may arise, regarding aromatised wine products (AWP) or flavoured OFBs. 

Similarly,  the  CN  2206  heading  admits  products  not  entirely  of  fermented  origin12,  but  the 
permitted  amount  is  not  specified13,  and  the  jurisprudence  in  this  area  (see  box  2)  did  not 
establish  any  straightforward  criteria.  As  a  result,  various  MS  have  already  adopted  non 
harmonised provisions establishing a margin of tolerance for products containing AFC by either 
(i)  adopting  a  flexible  approach  to  functional  alcohol  added,  or  (ii)  setting  specific  maximum 
limits (in ABV terms) to the amount of AFC that can be added to a fermented beverage before the 
tax category changes (typically 1.2% vol). 

To  the  extent  the  tax  differential  between  Art.  12  and  17  and  between  Art.  17  and  20  is  high, 
there  remains  incentives  for  certain  businesses  to  exploit  this  ambiguity.  It  is  difficult  to 
accurately  quantify  the  size  of  this  market,  however  2017  estimates  are  in  the  region  of  850 
billion  litres.  Approx.  550  billion  litres  of  which  are  flavoured  beer,  which  does  not  pose 
classification issues as Regulation 1967/200514 addressed this issue. However  this is a growing 
area, although moderately, and the risk of abuse may become more relevant in the future.  

The key drivers of the classification problem are discussed in detail in Annex 8.   

2.4.2.  Consequences: who is affected and how? 

As  mentioned  above,  the  Ramboll  evaluation  identified  approximately  70  different  cases  of 
products “difficult to classify”, across most of the MS. While the consequences surrounding each 
case  are  unique  (some  were  resolved  swiftly  following  a  few  exchanges  between  the  tax 
administration and the economic operator in question, while others became the subject of lengthy 
court  cases  spanning  several  years),  it  is  clear  that  all  the  cases  have  resulted  in  additional 
administrative burdens for the tax administrations (who had to dedicate additional resources to 
enforce  their  view  of  the  correct  classification)  and  compliance  costs  for  economic  operators 
(who  needed  to  undertake  similar  actions  to  defend  their  position  against  either  the  tax 
administration or a competitor).  

An  important  outcome  revealed  in  relation  to  the  situations  documented  was  litigation  costs. 
Disputes between tax administrations and operators were likely to be taken to court, resulting in 
significant costs both for the administration and for the economic operators if the financial risk at 
stake  was  considerable.  Additionally,  litigation  resulted  in  significant  costs  for  economic 
operators seeking to correct the perceived unfair competition presented by “difficult to classify” 

12   The explanatory notes and classification opinions adopted by the Harmonised System Committee relating to Heading 2206 
states:  “All  these  beverages  may  be  either  naturally  sparkling  or  artificially  charged  with  carbon  dioxide.  They  remain 
classified under this heading even when fortified with added alcohol or when their alcohol content has been increased by 
further fermentation, provided that they retain the character of products classified under this heading.” 

13   When goods are prima facie classifiable under two or more headings, the CN rules require that classification is effected as 
follows: “mixtures, composite goods consisting of different materials or made up of different components, and goods put up 
in  sets  for  retail  sale,  (…),  shall  be  classified  as  if  they  consisted  of  the  material  or  component  which  gives  them  their 
essential character, in so far as this criterion is applicable”. 

14   Commission  Regulation  (EC)  No 1967/2005  of  1  December  2005  concerning  the  classification  of  certain  goods  in  the 

Combined Nomenclature, OJ L 316, 2.12.2005, p. 7–9 

12 

 
 
 
                                                 
products. This has been particularly observed in cases when high-strength mixtures emulated or 
directly competed with spirits or intermediate products which were taxed at a higher rate. 

Member States authorities 

As  far  as  the  disparities  between  customs  and  excise  duties  are  concerned,  businesses  may  be 
tempted  to  request  a  classification  in  jurisdictions  where  it  is  more  likely  to  obtain  a  more 
favourable (tax wise) classification, in order to get competitive advantages across all EU national 
markets.  Reportedly,  there  have  been  cases  of  ‘BTI  shopping’,  i.e.  demands  submitted  in  MS 
where  a  favourable  classification  was  considered  more  probable.  However,  the  BTI  rules  and 
practices seem to be changing: BTI shopping has become less feasible, and some customs release 
BTI  decisions  only  to  products  for  export.  Still,  BTIs  are  not  exempt  from  disputes,  although 
concrete cases are rare, and customs authorities rarely challenge a BTI issued in another MS. 

Besides  the  risk  and  the  costs  of  disputes,  the  lack  of  clear  criteria  and  parameters  for  certain 
‘borderline’  products  makes  the  process  complex,  long,  and  unpredictable  for  all  involved. 
Although  it  concerns  formally  the  customs  classification,  it  is  the  consequential  excise  duty 
categorisation that is primarily at stake, so the administrative burden caused by CN classification 
should  be  considered  as  directly  related  to  the  functioning  of  the  excise  duty  system.  Burdens 
and  costs  related  to  these  uncertainties  for  administrations  and  businesses  vary  considerably 
between MS. The Study estimates the costs at EUR 1-1.5 million/year at EU level. 

The bulk of the extra burden is borne by national authorities. Eleven MS consulted in the context 
of  the  Ramboll  evaluation  agreed  or  strongly  agreed  that  the  difficulties  encountered  with  the 
classification of alcohol and alcoholic beverages were leading to increased administrative costs. 
These costs relate primarily to the additional efforts required to deal with complex classification 
cases,  including  laboratory  tests  and  the  extra  labour  to  manage  the  dossier  and  liaise  with  the 
applicant.  Unfortunately,  none  of  the  eleven  MS  were  able  to  specify  precisely  to  what  extent 
their  administrative  costs  were  greater  than  they  would  have  been  otherwise.  As  for  anecdotal 
evidence, French authorities reported that 'the dispute on the classification with the producer of a 
product of fermented base which has been elaborated to resemble distilled alcohol requires nine 
employees of the tax and customs authorities to be involved'.  

To cope with the mounting number of 'borderline products' various MS have established ad hoc 
expert groups responsible for  defining detailed classification rules and procedures and ensuring 
consistency in  their tax treatment. Typically,  these  groups operate at the central level,  collating 
the  difficult  cases  that  cannot  be  solved  by  regional  customs  offices.  An  intensification  of  the 
collaboration and exchanges between customs authorities at EU and international level aimed at 
resolving  the  uncertainties  in  the  interpretation  of  the  subjective  criteria  concerning  certain  CN 
2206  products,  which  also  results  in  costs  for  MS  has  also  been  reported.  Unfortunately  the 
customs  administrations  interviewed  were  not  in  the  position  to  estimate  the  frequency  of 
problematic cases, and the administrative burden attributable to these dossiers. 

The  existence  of  tax  incentives  having  a  product  classified  within  one  excise  category  over 
another has resulted in the development and marketing of products which seek to comply with the 
requirements  of  a  more  beneficial  tax  category  while  arguably  (i.e.  in  the  opinion  of  MS  tax 
administrations  and  some  competitors)  circumventing  the  intention  of  the  legislator  of  what 
should  fall  within  the  more  favourable  category.  These  manufacturers  are  exploiting  the 
uncertainties  and  this  is  depriving  MS  of  tax  revenues.  However  estimates  of  foregone  tax 
revenues are highly speculative and it is not feasible to determine precisely what share of these 
products have been developed purely for tax optimisation purposes, or what is the importance of 
an advantageous tax classification vis-à-vis other factors. Annex 9A presents the results of case 
studies  relating  to  the  classification  issues  with  reported  examples  of  specific  products.  In  a 
nutshell,  depending  on  the  characteristics  of  the  products  (e.g.  the  alcohol  content),  the 

13 

 
 
determined CN classification, the country in which it is being sold and other individual variables 
of each case, the differences in applicable excises duties can vary between: 

  7.48  EUR/HL  to  89.7  EUR/HL  of  finished  product  for  ready-to-drink  products  (e.g. 

alcopops); 

  79.55  EUR/HL  (a  10-12%  ABV,  “Irish  cream”  type  product  in  the  UK)  to  256.864 
EUR/HL  (a  cleaned  up  fermented  alcohol  at  14-15%  with  sugar,  aroma,  acidifier, 
colouring  and  fizz  in  France)  of  finished  product  for  medium  strength  fermented 
beverages, and; 

  200.00/ HL (a 21% ABV, fermented beverage in PT) to 331.40 EUR/HL (a 22% special 
fermentation  of  'made  wine'  decolourised  and  flavour  stripped  and  then  sold  in  Vodka 
style packaging in the UK) of finished product. 

The  lack  of  a  harmonised  approach  for  beverages  containing  AFC  across  MS  could  lead  to 
adverse  impacts  on  internal  market  functioning  and  tax  revenues.  In  the  absence  of  clear 
regulatory statue for AFC these products may be subject to classification disparities as well.  

Finally  the  lack  of  a  separate  EPC  for  OFB  is  an  issue  for  market  monitoring  and  control 
purposes due to the lack of accurate data. This could result in the incorrect calculation of excise 
duty  due  and  the  associated  financial  guarantee  required  for  intra  community  movements, 
resulting in disputes (and costs) between tax authorities and businesses. 

Businesses 

The  Ramboll  evaluation  concluded  that  the  classification  of  most  alcoholic  beverages  from  an 
excise perspective was generally seen as straightforward and results in no administrative burden 
linked  to  the  application  of  the  obligations  inscribed  in  the  legislation.  At  the  same  time,  the 
stakeholders  pointed  out  that  issues surrounding  the "difficult to  classify"  products  do  however 
result  in  increased  costs  for  all  the  stakeholders  concerned;  the  high  costs  identified  were  the 
result of the complications and disputes arising from situations in which the stakeholders disagree 
on  the  correct  interpretation  of  the  provisions  of  the  Directive.  Nearly  30%  of  the  economic 
operators  consulted  in  the  context  of  the  evaluation reported  that  they had  had  difficulties  with 
the assignment of alcohol and alcoholic beverages to the categories of the Directive. Difficulties 
were noted in all sectors but the beer sector indicated that these difficulties had led to increased 
administrative costs.  

The costs implied for each organisation varies significantly depending on the evolution of a given 
case, the economic importance of the disputes, the willingness of the parties to settle the matter 
via the judicial system, etc.15 A representative of a trade association in the area of spirit producers 
indicated anecdotally that a court dispute over the classification of a product of fermented base 
with  added  ethyl  alcohol  lasted  for  four  years.  In  fact,  only  five  out  of  43  trade  associations 
responding  to  this  question  did  not  report  that  their  administrative  costs  had  increased  due  to 
classification problems.  

This lack of clarity and legal uncertainties resulted in numerous CJEU cases in the past and high 
costs for businesses. While the number of cases reduced since the judgment of the CJEU in case 
C-150/08,  there  are  continued  disagreements.  However  due  to  the  high  costs  borne  by  certain 
businesses,  which  saw  their  turnover  halved  and  in  some  case  almost  caused  their  bankruptcy, 
there  is  limited  appetite  for  more  litigation.  In  fact,  businesses  have  become  more  risk  wary. 

15   Precise monetary quantification of the expected cost has not been possible due to the varied nature of the cases 

reported according to the research conducted during the evaluation.  

14 

 
 
                                                 
Launching  new  products  in  the  absence  of  formal  classifications  may  result  in  increased 
administrative  burden  and  costs  for  businesses  and  delays  in  getting  new  products  onto  the 
market.  According  to  stakeholders  this  is  a  serious  issue  as  other  countries'  classifications, 
including  third  countries,  are  seldom  the  subject  of  legal  challenges,  thus  creating  competitive 
advantages for these businesses.  

Misclassifications  of  products  may  result  in  higher  excise  duties  for  businesses  and  as  a  result 
higher  financial  guarantees  may  also  be  imposed.  This  may  result  in  substitution  effects  if  the 
higher excise duties are passed on in full to the consumers. There are conflicting data regarding 
substitution effects, however the introduction of the 'alcopop' tax in Germany is a classic example 
of how taxes can have a profound impact on substitution.  

Box 3 – Possible substitution effects induced by the introduction of the ‘alcopop tax’ in Germany 

Useful  insights  on  substitution  effects  between  different  alcoholic  products  can  be  drawn  from  the  review  of  the 
consumption trend of alcoholic beverages in Germany between 2000 and 2007. In the first three years of years 2000s, 
mixed  drinks  grew  in  popularity  and  their  consumption  recorded  an  impressive  growth  (about  78%  per  year,  on 
average), which partly offset the decline in the volumes consumed of beer and spirits.  

After the introduction of the alcopop tax in July 2004, consumers and the market responded negatively, and a major 
decline in consumption was recorded – i.e. amounting to some 50% per year between 2004 and 2006. Looking at the 
trend  in  consumption  of  other  beverages,  it  seems  that  some  previous  drinkers  of  mixed  drinks  switched  to  beer  as 
indicated by the slowing down of its declining rate. 

The existence of a similar substitution effect has been confirmed by a 2010 study to assess the effects of the alcopops 
tax on alcohol consumption and beverage preference among adolescents in Germany.16 Based on 2003 and 2007 data 
from  the  cross-sectional  survey  of  the  European  School  Survey  Project  on  Alcohol  and  other  Drugs,  the  study 
confirmed a partial substitution of alcopops by spirits and beer among 12–17-year-olds. 

Source: EA, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages", 2017 

In addition to the quantifiable difference in terms of applicable excise duty as explained above, 
economic  operators  interviewed  in  the  context  of  the  case  study  on  classification  issues 
conducted under the Ramboll evaluation, have reported barriers to conducting business across the 
EU resulting from uncertainty with respect to the treatment of their product (i.e. being treated as 
W200/2206  in  the  home  country,  but  considered  S200/2208  in  other  MS).  Another  negative 
consequence concerned unfair competition aspects of the internal market; according to economic 
operators  reporting  examples  of  such  products,  the  existence  of  this  classification  issue  affects 
competition in two different ways:  

 

firstly, it places producers of similar products which are entirely from alcohol of distilled 
origin  (which  compete  on  the  same  market)  at  a  severe  competitive  disadvantage  (see 
above the difference in duty levels);  

  secondly,  it  undermines  the  excise  category  itself  by  allowing  products  to  deliberately 
benefit  from  taxation  at  the  same  level  as  'clear-cut'  products  whose  protection  the 
category itself was supposed to benefit.  

Consumers/Citizens 

The  relationship  between  tax,  affordability  and  consumption  at  systemic  level  is  in  research 
systematically  confirmed  weak  (see  Annex  9).  Therefore,  the  overall  impact  on  per  capita 
consumption of alcohol possibly caused by the tax-induced substitution between ‘standard’ and 

16  Muller S, Piontek D, Pabst A, Baumeister SE, Kraus L., Changes in alcohol consumption and beverage preference among 

adolescents after the introduction of the alcopops tax in Germany. Addiction 2010; 105:1205–13. 

15 

 
 
 
                                                 
‘borderline’ products is considered to be of modest magnitude. This does not evidently deny the 
existence  of  problems  linked  to  the  consumption  of  certain  alcoholic  beverages  by  certain 
socioeconomic  segments  of  the  population,  which  have  been  tackled  inter  alia  through  ad  hoc 
national taxes, which was also confirmed by the public health stakeholders interviewed.  

The lack of a direct correlation between tax policies and per capita consumption seems intuitively 
confirmed also by noting that the decline in the total alcohol consumption registered by WHO – 
Global Information System on Alcohol and Health (GISAH) was the strongest for spirits (-2.11% 
in seven years), but in almost the same period the registered increased in excise duty level was 
the lowest for this category (+ 2.4%).  

Nevertheless,  borderline  products  which  enjoy  a  favourable  tax  classification  may  appeal  to 
young  people  or  vulnerable  social  categories  with  limited  disposable  income.  Increase  in  the 
development  of  borderline  products  may  result  in  increased  consumption  and  overall  create 
negative public health impacts.  

2.4.3.  How will the problem evolve (baseline scenario)? 

Harmonised  classifications  of  alcoholic  beverages  are  of  utmost  importance  for  intra  EU  and 
international trade. In 2016, the value of alcoholic beverages exports and imports from/to the EU 
amounted to EUR 24 billion and 4.5 billion respectively. Classification uncertainties of alcoholic 
beverages may cause barriers to trade, market disruptions and enforcement problems. 

The  Study  supporting  this  impact  assessment  suggests  that  the  dimension  of  the  categories 
containing borderline products are limited in volume terms. The mixed drink category amounts to 
an estimated 78 million litres that is approximately 6% of the ‘fiscal’ OFB category. In a micro 
perspective, mixed drinks with a fermented base may (and did) represent a cheaper alternative to 
spirit-based  mixed  drinks,  thanks  to  the  more  favourable  tax  treatment,  thus  posing  a  potential 
competition issue. 

Classification  uncertainties  and  disputes  are  becoming  less  frequent  due  to  the  high  litigations 
costs  borne  by  certain  businesses.  As  a  result  businesses  including  both  brand  owners, 
wholesalers and distributors have become more risk-wary towards the placement on the market of 
new products if not clearly identified. However the disparities persist due to the subjective rulings 
of  the  CJEU  and  new  technological  developments  will  continue  to  create  uncertainties  if  the 
scope of the OFB category is not clarified.  

Businesses are now using alternative methods, for which precise figures are not available. Some 
national customs have adopted rules and procedures to effectively operationalise these criteria. In 
FR,  a  specific  platform,  i.e.  Soprano,  has  been  established  to  this  end.  The  platform  allowed 
authorised businesses to submit classification dossiers to obtain a preventive opinion in a faster 
way.  The  pilot  initiative  was  launched  in  2017  and  its  use  at  the  moment  is  voluntary,  but  if 
successful it might become the standard procedure for the submission of applications. In addition 
to  preventing  disputes,  the  expected  benefits  of  Soprano  also  include  a  reduced  length  of 
procedures so a shorter ‘time-to-market’ for enterprises. Nonetheless, as the national approaches 
are non-harmonised at EU-level there remains the risk of different/incoherent legal interpretations 
and  ensuing  disputes,  as  well  as  incentives  to  continue  to  develop  products  exploiting  these 
classification uncertainties.  

Competitive  advantages  will  persist  for  businesses  who  obtain  a  favourable  tax  classification, 
which  will  encourage  'classification  shopping'.  The  nature  of  ‘borderline’  products  is  different 
across markets since it relates to specific consumer preferences and opportunities, but in general 
the  problematic  area  seems  to  increasingly  focus  on  fermented  bases  having  undergone  some 
form of concentration and/or cleaning, both traded as such or used in final beverages. Cases were 

16 

 
 
reported  of  products  stored  in  the  producers’  tax  warehouses  as  CN  2208,  then  dispatched  to 
another  country  as  CN  2206;  beverages  moved  in  a  bordering  country,  re-bottled  and  re-
imported, with a more favourable classification; trade of entirely fermented bases with ABV of 
22%  coded  as  CN  2206  etc.  In  this  respect,  the  products  covered  by  the  CJEU  rulings  are  no 
longer the core of classification uncertainties and issue, but other new challenges are seemingly 
emerging. 

The  unclear  application  of  'entirely  fermented  origin'  and  the  absence  of  a  separate  EPC  may 
cause some market distortions and monitoring / control issues for some products. With respect to 
future trends, two considerations apply: (i) an increasing number of MS have adopted a flexible 
approach  to  AFC,  possibly  in  connection  with  the  EU-level  legislation.  This  trend  is  likely  to 
continue,  since  MS  that  have  not  set  explicit  threshold  for  AFC  are  reportedly  inclined  to 
maintain margins of tolerance in the classification of these products. So disparities of treatment 
are progressively less likely; (ii) on the other hand, the market size of these products is growing, 
although moderately, so the risk of abuses may become more relevant in the future. 

2.5.  Problem 3 – Dysfunctional application of reduced rates 

2.5.1.  The problem and its EU dimension 

The  scope  and  application  of  reduced  rates  to  some  alcoholic  beverages  is  a  multi-faceted 
problem,  which  could  be  sub-divided  into  more  specific  aspects.  Whereas  the  Studies  and  the 
stakeholders consulted, globally  consent that the reduced  rates  framework is  working, there are 
issues that are acute to a specific industry or to a specific aspect of the legal framework.  

Unequal treatment of producers of alcoholic beverages  

The first sub-problem within the application of reduced rates evolves from the unequal treatment 
of producers of alcoholic beverages which can lead to market distortions. The Directive allows 
MS to grant reduced excise rates to small producers of beer (Art. 4) and ethyl alcohol (Art. 22) 
only;  small  producers  of  wine,  OFB  (including  cider  and  perry)  and  IP  are  not  subject  to  this 
provision.  Even  if  the  MS  wanted  to  correct  this  imbalance,  the  Directive  effectively  prevents 
them  from  doing  so.  Ireland  and  the  UK  highlighted  this  unfair  discrimination  in  the  Ramboll 
evaluation.  Detailed  analysis  of  reduced  rates  and  special  schemes  applied  to  all  sectors  of 
alcoholic beverages is included in Annex 10 with key aspects recapitulated here below.  

When  it  comes  to  cider  (and  perry),  in  most  countries,  cider  makers  are  not  intermingled  in 
complex  relationships,  and  small  cider  producers  make  cider  themselves,  rather  than  providing 
products  to  larger  companies.  In  terms  of  market  structure,  micro  and  small  cider  makers 
represent the vast majority of the population (96% in the UK, 99% in FR, 93% in IE), but a small 
share of the market.  

The fortified wines industry includes growers, producers of the base wine and fortifiers. The vast 
majority of growers do not produce the end product. The number of small producers within this 
industry, who would be affected by the application of reduced rates is small.  

For wine producers in MS applying a zero or near zero excise duty rate to wine, the introduction 
of  reduced  rates  would  bring  no  tax  advantage  to  small  producers  and  therefore  the  relative 
competitive position of drinks would not change. This is not the case in MS applying a positive 
excise duty rate. However in the view of stakeholders, the introduction of reduced rates for small 
producers  of  wine  could  result  in  the  subsequent  removal  of  the  zero  rate,  an  outcome  which 
would negatively affect all businesses, both large and small.  

17 

 
 
Taking  account  of  these  factors,  this  impact  assessment  will  focus  on  small  cider  makers  only. 
For  the  sake  of  transparency  and  completeness  the  analysis  of  reduced  rates  for  small  wine 
producers and fortified wines together with options is presented in Annex 10. 

Legal uncertainty 

The second sub-problem area of the application of reduced rates concerns the lack of clarity of 
the  current  provision  and  the  legal  uncertainty  thus  created  for  the  markets.  The  granting  of 
reduced  rates  to  small  producers  is  conditional  upon  their  independence  in  legal  and  economic 
terms from any other brewery and no operations under license. However, the Directive does not 
define  the  term  'legally  and  economically  independent'  and  this  has  resulted  in  businesses 
consulting other EU law to resolve this17. With respect to beer brewed under licence, the issue has 
been largely resolved by existing guidelines and clarifications. Despite this, conflicts on the term 
'legally and economically independent' between producers and authorities persist, which require 
legal proceedings, rulings and therefore litigation costs for both parties.  

Box 4 – CJEU case C- 285/14: Brasserie Bouquet SA (FR)  

Brasserie Bouquet operates a restaurant in which it sells beer it has brewed itself. It entered a membership contract 
with ICO 3B SARL, which authorised Brasserie Bouquet to use the trademarks, the commercial designation "Les 3 
Brasseurs" and to receive ICO 3B SARL's know-how. In exchange Brasserie Bouquet paid an entrance fee and was 
required to exclusively obtain certain products from ICO 3B SARL. 

Brasserie Bouquet considered it satisfied the conditions of the small brewery relief. The  FR authorities challenged 
the application of the reduced rate that Brasserie Bouquet paid. The CJEU ruled that for the purpose of applying the 
reduced rate on beer the condition laid down in Art. 4(2) of the Directive according to which a brewery must not 
operate under licence, is not met if the brewery concerned makes its beer in accordance with an agreement pursuant 
to which it is authorised to use the trademarks and production process of a third party. 

The UK businesses consulted confirmed that 'contract brewing' may still have a certain degree of 
subjectivity  regarding  whether  a  contract  breaches  the  independence  of  each  counterpart  or  not. 
French stakeholders reported that this issue should have been settled by a Customs Memorandum, 
but this has led to different interpretations by local customs offices.  

In  terms  of  the  cross-border  functioning  of  the  reduced  rates  for  small  brewers,  MS  report 
implementation problems, as customs authorities in the country where the product is released for 
consumption  need  to  check  the  status  of  the  brewer.  UK  authorities  consider  this  to  be  a  ‘self-
declaration’ scheme, so that controls on businesses claiming the status of ‘small producer’ are risk 
based. In FR, a small brewer must make a one-off submission of a set of company documents. 

In  case  of  disputes,  the  customs  authority  in  the  MS  of  destination  may  submit  a  request  for 
information to the customs authority in the country of origin to verify the status of a small brewer. 
This  verification  may  be  problematic  in  the  case  of  businesses  based  in  a  non-EU  country. 
However, most of the customs authorities interviewed do require a certificate from the brewers or 
their  distributors,  issued  or  stamped  by  the  home  country  customs  authorities.  Businesses 
interviewed confirmed that, when moving products across borders, the local distributor may ask for 
such  a  certificate,  but  this  does  not  always  happen.  A  problem  arises  when  (i)  a  small  brewer 
established  in  a  MS  not  requiring  the  certificate  and  not  issuing  the  certificate  to  domestic 
manufacturers intends to enter the market of a MS requiring such a certificate; (ii) or when the MS 
of  destination  does  not  automatically  recognise  the  status  granted  by  the  country  of  origin.  FR 
allegedly  does  not  accept  self-certification  and  does  not  always  recognise  checks  performed  by 

17   Commission  Recommendation  of  6  May  2003  concerning  the  definition  of  micro,  small  and  medium-sized  enterprises, 
C(2003) 1422, 6.5.2003 provides an explanation of when two companies should be considered partners or linked. It does not 
provide an explanation on 'brewing under licence' or 'contract brewing'. 

18 

 
 
 
 
 
                                                 
the Belgian customs authority and this is affecting a significant number of Belgian producers. In 
this regard, BE noted during the Ramboll evaluation that at an administrative level there are a lot 
of  problems  regarding  interpretation  in  order  to  determine  the  status  of  a  'small  independent 
brewery'.  

Even  though  the  reduced  excise  rates  for  small  breweries  are  estimated  to  cover  only  5%  of 
production, it is estimated that 95% of active breweries are covered by this relief. The problems 
described  above  may  be  of  limited  scope  today.  However  with  the  continued  increase  in  the 
number of small breweries and their growth into larger businesses, it is likely that cross-border 
trade flow will increase and the commercial relationships will become more complex. As a result 
these uncertainties are likely to evolve into bigger issues in the future.  

The functioning of reduced rates for distilleries meets the same obstacle of an unclear definition 
of 'legally and economically independent' businesses. The rationale of this relief is to protect and 
preserve  the  traditional  distilling  culture.  The  distilleries  benefiting  from  the  reduction  are  the 
ones  likely  to  work  on  an  occasional  basis,  e.g.  after  fruit  harvesting  of  grape  pressing,  selling 
their products, for the very local market. The threshold was therefore set much lower, making the 
commercial viability of such a scale of production extremely limited.   

During  stakeholder  consultation  most  of  producers  in  the  ethyl  alcohol  industry  expressed  a 
negative opinion on the current threshold. While all considered that it was not fit for purpose the 
reasons differed. Most stakeholders showed limited, if any, interest in a revision of the threshold 
and most authorities expressed no intention to implement an amended provision at national level. 
Taking account of this, this impact assessment will not focus on this problem area.  

Irrelevant and incoherent alcoholic strength thresholds for some product categories 

The  final  problematic  area  of  application  of  reduced  rates  relates  to  low  strength  alcoholic 
beverages.  Art.  5,  9,  13,  18,  and  22  of  the  Directive  allow  MS  to  apply  reduced  rates  on  low-
strength  alcoholic  beverages,  but  the  Directive  is  silent  on  the  targets  or  objectives  of  these 
provisions.  More  specifically,  it  is  not  clear  whether  the  option  for  reducing  rates  represents  a 
tool  to:  i)  tailor  national  taxation  policies;  ii)  pursue  objectives  of  industrial  and  agricultural 
policy; iii) incentivise product innovation; and/or iv) achieve health policy objectives. This is not 
generally  perceived  as  an  obstacle  to  its  uptake  in  MS  who  are  contented  with  the  flexibility 
offered  under  the  arrangements  allowing  them  to  pursue  their  own  priorities  and  adapt  the 
structure  of  the  excise  duty  on  alcohol  to  national  needs.  However  the  alcoholic  strength 
thresholds  to  apply  reduced  rates  are  set  at  levels  that  are  largely  irrelevant  for  some  product 
categories, while applicable to the entire market for other products. For example: 

Wine, 
intermediate 
products,  ethyl 
alcohol 

The current thresholds for wine (8.5% vol.), IP (15% vol.) and ethyl alcohol (10% vol.), do not 
to  reflect  the  features  of  products  included  in  these  categories.  Very  few  products  in  these 
categories  could  fall  below  the  threshold.  In  most  cases,  to  comply  with  product  definitions 
spelled  out  in  EU  law,  such  products  must  have  an  alcohol  content  above  the  maximum 
thresholds set by the Directive. 

Beer 

OFB 

The  current  threshold  allows  the  application  of  reduced  rates  mainly  to  radler  and  very  few 
other products. It is too low to provide any tangible incentive for brewers to be innovative and 
create new low-strength products or for consumers to drink low strength beer.  

The current threshold set for OFB (8.5% vol.), which covers almost the entire market for cider 
and perry and a portion of the market for fruit wine, appears to pose no policy problem  

It  should  be  recalled  that  the  present  impact  assessment  does  not  touch  upon  the  duty  rates  of 
excisable  products  but  the  excise  duty  structure.  What  is  discussed  in  the  present  impact 
assessment  is  therefore  not  the  levels  of  reduced  rates  for  different  categories  of  alcoholic 
beverages, but rather what products they may be applied to and under which conditions, including 

19 

 
 
 
 
 
thresholds. The concerns presented here do not relate to the functioning of the internal market as 
such – which is deemed to be functioning well given that whatever the national considerations, 
the  excise  duty  is  charged  where  the  product  is  released  for  consumption  –  but  to  the 
effectiveness  of  the  thresholds  in  helping  the  MS  to  set  national  policy  objectives.  As  reduced 
rates are therefore irrelevant for producers of wine, ethyl alcohol and IP this impact assessment 
will not focus these products. 

The  key  driver  of  the  dysfunctional  application  of  reduced  rates  relates  to  the  obsolete  and 
unclear provisions of the Directive, which is discussed in detail in Annex 11. 

2.5.2.  Consequences: who is affected and how? 

Much  of  consequences  of  this  problem,  particularly  with  regard  to  the  businesses  and  to  some 
extent  also  the  national  administrations,  has  been  explained  in  detail  under  the  core  problem 
definition.  This  is  because  how  some  of  the  stakeholders  are  affected  constitutes  precisely  the 
problem at stake in the present impact assessment. To avoid repetitions, this section summarises 
the main impacts under headings relevant to specific type of stakeholders. 

Member States authorities 

The  reduced  rates  for  small  producers  and  low  strength  alcohol  reduce  the  revenue  MS  collect 
from  excise  duties.  However,  all  customs  authorities  interviewed  during  the  Studies  supporting 
this impact assessment considered that the reduced rate schemes did not generate large costs for 
the public budget. Similarly, in terms of administrative burdens for businesses and enforcement 
costs  for  public  authorities,  the  Studies  confirmed  that  the  reduced  rates  did  not  require 
unnecessary efforts, by either businesses or customs. Enforcement costs with respect to domestic 
producers were considered to be minimal by all tax and customs authorities interviewed. The UK 
noted  in  the  context  of  the  Ramboll  evaluation  that  reduced  rates  for  small  cider  makers 
contributes greatly towards rural  economies, has a minimal impact on government revenue  and 
has no adverse impact on intra-EU trade.  

In the cross-border context, as described under the problem definition, the increase in the number 
of  small  producers  of  beer,  their  complex  business  structures  and  the  increase  in  cross-border 
trade generates some problems for enforcement and implementation, as national authorities must 
determine if the producer is entitled to the reduced rates. 

The  uncertainty  in  the  interpretation  of  'legally  and  economically  independent'  results  in  legal 
proceedings and therefore costs for stakeholders. No specific estimates or anecdotal evidence was 
provided by the MS, which most likely stems from the fact that the administrations or companies 
do not keep such readily available statistics and disaggregating from other data is difficult.   

Businesses 

Findings  show  that  the  vast  majority  of  active  brewers,  97%  in  the  EU,  are  eligible  for  the 
reduced  rates  scheme  for  small  brewers  and  therefore  subject  to  the  legal  uncertainties 
highlighted above. This uncertainty may hinder expansion and development of small brewers.  

The competitive position of small cider makers vis a vis large producers is similar to that of small 
breweries.  However,  while  small  beer  producers  are  entitled  to  enjoy  reduced  rates,  the  small 
cider makers are not. While the minimum rate for cider is zero, most MS with a traditional cider 
market apply a positive excise rate. As a result the zero excise rates is only applied to 9% of cider 
consumption.  

Indeed, given the industry similarities between beer and cider, the competitiveness of the small 
cider  makers  could  be  explained  through  the  proxy  analysis  done  for  the  small  breweries.  The 

20 

 
 
latter,  in  the  course  of  the  studies  supporting  this  initiative,  were  asked  whether  reduced  rates 
supported their competitiveness or if the reduced rates were largely appropriated by distributors 
or passed on to consumers – resulting in a neutral effect on small brewers overall. Small brewers 
considered that the provision supported directly the competitiveness of small producers as the tax 
reduction was not passed through the value chain down to the consumers, and that the rebate was 
effective  in  counterbalancing  lower  costs  enjoyed  by  large  companies,  in  particular  because  of 
economies of scale and market access barrier. 

While reduced rates have a clear positive impact on Small and Medium-sized Enterprises (SMEs) 
competitiveness, their effect on the entry rates in the beer industry is not univocal. There seems to 
be  a  trend  towards  the  growth  of  the  micro  and  small  brewery  segment,  which  is,  according  to 
businesses’ view, largely driven by market demand, and which is even across countries, regardless 
of whether they have implemented the reduced rates or not. In FR and the UK, where the discount 
for microbreweries is significant (50% of the standard rate), their number has more than doubled 
over the 2010-2015 period (annual growth rate of respectively 16% and 19%). In AT, the number 
of microbreweries remained stable (+13% over 5 years); however, the discount for microbreweries 
in this country is significant (40% of the standard rate). In Italy, where there are no reduced rates, 
the number of microbreweries almost doubled in the 2010-2015 period. While businesses consider 
that reduced rates support the entry of new players, these data suggest that the provision of reduced 
rates is neither a necessary nor a sufficient condition, and that other national factors are also at play 
(again, consumer demand, as well as industry structure, market stability, type of beer consumed by 
the population, competition from other beverages). Overall the Ramboll evaluation concluded that 
it is unlikely that the presence of reduced rates creates market distortions by unduly advantaging 
smaller firms that benefit from the rates. 

The  threshold  for  low  strength  beer  to  apply  reduced  rates  is  low  and  as  a  result  there  is  little 
incentive  to  develop  this  sector.  Beer  producers  interviewed  noted  that  producing  low  strength 
beers  cost  more  than  producing  standard  beers  and  therefore  only  certain  large  producers  can 
absorb this cost. Low strength beer may also taste differently from regular beer due to the ABV. 

Consumers 

It is possible that small producers – of beer or cider - who fail to receive the reduced rates due to 
a  different  interpretation  of  'legally  and  economically  independent'  or  due  to  the  lack  of 
corresponding  provisions  allowing  for  duty  reduction,  may  choose  to  absorb  this  cost  as  it  has 
been  described  above.  However  as  these  are  small  producers,  with  tight  margins,  it  could  be 
assumed  that  the  extra  excise  duty  would  (have  to)  be  at  least  partially  passed  on  to  the  final 
consumer.  The  small  breweries  interviewed  for  the  supporting  studies  did  not  seem  to  confirm 
this,  claiming  small  brewers  are  most  likely  to  produce  craft  beer,  as  opposed  to  the  mass 
products mostly marketed by large companies. As a consequence, price levels are different, and 
this  reduces  the  incentive  to  pass-on  the  tax  discount  in  order  to  remain  competitive  vis-à-vis 
larger  players.  Further  empirical  evidence  is  provided  by  an  industry  study  on  British  small 
brewers,  where most  of the respondents indicated that the excise reduction was kept  within the 
firm (e.g. for investment), and only 12% indicated that it led to a price reduction18. As above, it 
can be assumed that the cider market would behave similarly and is similarly impacted. 

2.5.3.  How will the problem evolve (baseline scenario)  

With respect to small brewers, in most of MS analysed in-depth in the Studies for this initiative, 
the  number  of  microbreweries  is  growing  quickly.  Even  though  the  rate  of  growth  is  likely  to 

18   SIBA, “British Beer: The Report on the 2017 Members’ Survey of the Society of Independent Brewers” 

21 

 
 
                                                 
diminish in the future as the market achieves a higher level of maturity, there is no indication at 
this  stage  that  the  phenomenon  is  halting19.  So  far,  the  growth  in  the  number  of  small  brewers 
was not matched by a parallel increase in their market share in the beer market. As such, there is 
a limited expectation that market effects (i.e. competitive distortions), costs to the public budget, 
or health impacts would become more prominent in the future.  

At the same time, as the sector of small brewers achieve maturity and some players grow in size, 
it is likely that (i) cross-border trade flow augments, so that the not always smooth functioning of 
the scheme in MS other than that of establishment becomes a more significant problem; and (ii) 
the  commercial  relationships  become  more  complex,  and  more  forms  of  cooperation  could  be 
part of the grey areas identified above, if the provisions are unchanged.  

With respect to small cider makers, the current imbalances within the markets will remain, should 
no  change  to  the  current  situation  be  introduced.  Although  the  cider  industry  is  small  and 
traditionally EU based20 compared to other alcoholic beverages, the industry is one of the fastest 
growing in some MS21. As the industry grows, it is likely that players may wish to increase their 
cross-border trade to remain competitive. This may be difficult in the absence of reduced rates. 

In terms of the thresholds for alcoholic strengths of certain beverages, many large beer producers 
are currently launching new beer with alcohol strength of 3.5% vol. Although above the reduced 
rate threshold these  new beers could be considered as  a competitive  product to  the current  low 
strength beers on the market. Some MS (FI, SE, DK, IE and UK) support this extension and other 
MS  pursuing  healthier  drinking  policies  may  wish  to  promote  this,  but  the  Directive  does  not 
favour  such  objectives.  Some  other  stakeholders  argue  that  the  application  of  reduced  rates  to 
low-strength alcoholic beverages may increase alcohol related harm as more affordable products 
may eventually encourage consumers to drink more.  

2.6.  Problem  4  –  Unclear  provisions  to  measure  the  Plato  degree  of  sweetened  / 

flavoured beer 

2.6.1.  The problem and its EU dimension 

Art. 3(1) of the Directive allows for levying excise duty on beer with reference either to the Plato 
degree or ABV of 'finished product'. The term 'finished product' is not defined in the Directive 
and this results in three different interpretations when it comes to measuring the Plato degree of 
sweetened/flavoured  beer  (i.e.  mixture  of  beer  with  non-alcoholic  additives  or  beverages).  The 
addition of sugar/flavour in the beer after fermentation may artificially affect its Plato degree, as 
the  Plato  method  seeks  to  estimate  the  concentration  of  extract  in  a  fluid  as  a  percentage  by 
weight.  The  three  different  methods  result  in  non-uniform  measurement  of  the  degree  Plato; 
depending on which approach is chosen. This, inevitably, leads to differences in the excise duty 
applied to products which can have the very same alcoholic content. 

Different excise duties will be mirrored in retail prices and consumption of such products. Indeed, 
some beer producers have reported that accounting for the added sugar when measuring the Plato 
degree is technically wrong, and can lead to unfair competition among them and in particular in 

19   British Beer & Pub Association, “Small Brewer Relief and the impact on future market structure – Discussion paper”, 2016. 
20   The European Cider & Fruit Wine Association, European Cider Trends 2017 note that 57% of consumption in 2016 was in 

Europe. North America and Africa account for 11% of consumption each. 

21   Per the European Cider & Fruit Wine Association, European Cider Trends 2017, the 5 year compound annual growth rate 

(2011 – 2016) was 156% in CZ, 122% in PL and 102% in RO. 

22 

 
 
                                                 
comparison  to  beer  mixes  which  contain  artificial  sweeteners  instead  of  sugar;  for  the  latter 
products the increased excise duty would not apply. 

The problem has also led to conflicts between beer producers and tax authorities, which require 
legal proceedings and rulings and entail litigation costs. In Germany, a brewer went to court in 
1997 seeking to have its radler (a type of sweetened beer) taxed based on the ‘real extract’ rather 
than the ‘present extract’ (see Annex 13 for further information on the approaches to measuring 
the  Plato  degree  of  sweetened/flavoured  beer).  The  national  court  finally  decided  against  the 
brewer’s  pleads  only  in  2004.  Recently,  a  similar  case  has  been  brought  to  court  by  a  Polish 
brewer (see Box 5). This case was referred to the CJEU (C-30/17 - Kompania Piwowarska) but 
only following 12 years of local legal proceedings in PL regarding the way in which excise duties 
on such beer should be determined. 

Box 5 - Calculation of excise duty on sweetened/flavoured beer: The Polish case (C-30/17 - 
Kompania Piwowarska) 

In  this  case  the  national  Polish  court  requested  a  preliminary  ruling  concerning  the  calculation  of  excise  duty  on 
sweetened/flavoured beer. A Polish beer company producing sweetened/flavoured beer disagrees with the Polish tax 
authority  on  the  measurement  method.  The  different  views  of  the  brewer  and  the  Polish  tax  authority  can  be 
summarised as follows. 

The brewer argues that the strength of the sweetened/flavoured beer in Plato degree should be measured accounting 
for  the  ‘real  extract’  (method  B1)  rather  than  ‘present  extract’  (method  B2)  of  the  finished  product.  Including  the 
sugar added after fermentation in the extract figure would be a technically wrong measurement, because this sugar 
does not add to alcohol formation. By contrast, the Polish tax authority requires method B2, i.e. measuring the Plato 
degree on the basis of the present extract, including the sugar added after fermentation.  

The Polish case clearly demonstrates the importance of the problem for both beer producers and tax authorities. By 
adopting  the  brewer’s  approach,  the  beer  producer  (tax  authorities)  must  pay  (receive)  PLN  87.8,  whereas  by 
adopting the tax authority’s approach it must pay (receive) PLN 109.8 (figures correspond to the example provided 
in  Annex  14)  per  hectolitre  of  beer.  Different  interpretation  of  the  way  of  applying  the  Plato  method  to 
sweetened/flavoured beer can lead to differences in excise duties for the same product.  

This example demonstrates the legal uncertainty for businesses associated with the co-existence 
of  the  different  measurement  methods,  which  constitutes  an  additional  aspect  of  the  problems 
related to the measurement of Plato degree of sweetened beer. The key driver of this problem is 
the divergent interpretations of the term 'finished product', which is discussed in Annex 12. 

2.6.2.  Consequences: who is affected and how? 

Member States authorities 

MS collect revenues from the excise duties. As shown in Annex 13 and 14, method B2 yields the 
highest excise revenue for the authorities. Moreover, approach A and B1 generate some problems 
for enforcement, as national authorities are reportedly unable to measure the Plato degree of the 
base beer, the real extract or the present extract by analysing the content of the bottled beer; any 
such checks must be done at the brewery by measuring both the Plato degree of the base beer and 
the  quantity  of  base  beer  included  in  the  end-product.  In  this  context,  enforcement  problems 
become  more  prominent  when  it  comes  to  applying  excise  duty  on  sweetened/flavoured  beer 
moved from another MS, as tax authorities could hardly perform checks in breweries based in a 
different  country.  Approach  B2  was  therefore  found  to  be  the  only  one  allowing  for  proper 
checks by customs laboratories, thus reducing room for tax fraud. It is also the method applied in 
the  majority  of  the  sample  MS  even  though  the  industry  is  of  the  opinion  that  it  is  technically 
incorrect. 

Finally,  as  described  above,  the  legal  uncertainty  and  the  differences  in  interpretations  lead  to 
legal proceedings and therefore costs for tax authorities and beer producers.  

23 

 
 
 
 
 
 
Businesses 

Some  beer  producers  claim  that  the  discrepancies  may  ultimately  lead  to  distortions  of 
competition  caused  by  artificially  –  or  mathematically  -  changing  the  Plato  degree  without 
altering  the  alcoholic  content.  There  is  no  market  data  available  which  would  distinguish  the 
different  types  of  sweetened/flavoured  beers  while  taking  into  account  their  methods  of 
production  and  measurement  of  the  alcoholic  strength  to  confirm  those  claims.  The  businesses 
interviewed in the context of the two Studies regarding the revision of the Directive often did not 
have readily available or shareable market analysis. A quick calculation of the different excises 
theoretically  applied  to  sweetened/flavoured  beer  with  alcoholic  strength  measured  using  the 
different methods, nevertheless highlights the disparities of treatment and potential for distortion 
(see Annex 14 for details).  

On  the  other  hand,  it  should  be  noted  that  sweetened/flavoured  beer  producers  are  free  to  use 
sweeteners (e.g. aspartame) to sweeten their products instead of sugar, if they want to avoid extra 
taxation  on  the  added  sugar.  Unlike  sugar,  sweeteners  do  not  increase  the  Plato  degree  when 
switching  from  approach  B1  to  approach  B2.  Tax  authorities  argue  that  given  that  only  a  few 
brewers use sweeteners instead of sugar, it shows that the extra excise duty is not a high burden 
for  them.  By  contrast,  brewers  explained  that  the  choice  to  use  sugar  rather  than  artificial 
sweetener is driven by marketing considerations, e.g. using only natural ingredients, rather than 
by cost considerations, e.g. tax savings. 

Consumers 

to  keep 

in  order 

It  could  be  argued  that, 
the  producers  of 
sweetened/flavoured beer may have to choose to absorb the extra cost. Assuming nevertheless the 
excise  duty  is  consistently  passed-on  to  consumers  in  the  retail  price,  it  would  affect  the 
competitiveness of products and the related demand, causing ultimately potential distortion of the 
market. In any case, the additional cost of higher excise duty would not disappear and would have 
to be borne by one or the other party. 

the  competitive  edge, 

Any change in excise duty reflected in a change in price is expected to impact the consumption of 
sweetened/flavoured beer. This in turn can, albeit to a minor extent, engender public health policy 
issues.  For  instance,  sweetened/flavoured  beer  is  thought  to  be  more  attractive  for  women  and 
young consumers, neither established beer drinking groups, which is confirmed by the fact that 
40% of radler drinkers are new to the beer category. However, research has shown that marketing 
plays a greater role in attracting these consumer groups than the actual content/taste of a beer22. 
On  the  other  hand,  radler  contains  less  alcohol  (2-2.5%  vol)  than  standard  beer,  so  it  may  be 
desirable  to  promote  a  shift  towards  beverages  containing  less  alcohol.  This  would  eventually 
reduce the overall alcohol intake and ultimately result in positive public health impacts. 

2.6.3.  How will the problem evolve in case of no-EU action (baseline)? 

Even though the EU market for sweetened/flavoured beer is relatively small – around 2.7% of the 
overall beer market in 2015 – it is growing faster than the beer market itself, which has actually 
stagnated in many industrial economies.  

Sweetened  beer  is  part  of  a  strategy  of  brewers  to  innovate  and  regain  market  share;  even  the 
mainstream beer brands like Heineken or Peroni have introduced sweetened/flavoured beers, and 

22  WHO  ‘Global  status  report:  alcohol  and  young  people’,  2001;  and:  ‘Beer  and  Health:  Moderate  consumption  as  part  of  a 
healthy  lifestyle’,  at  http://beerandhealth.eu/wp-content/uploads/2016/07/beer-and-health-web.pdf  (last  accessed  on  10  July 
2017). Stakeholders have also confirmed this statement. 

24 

 
 
                                                 
especially radlers, in recent years. The IWSR database reports a market growth by 6% between 
2015 and 2016 for sweetened/flavoured beer, and projects a market growth by 8.5% in 2017. A 
study23 forecasts steady growth for sweetened/flavoured beer in Europe to 2020. Therefore what 
may seem a problem of a limited, local scope today, unaddressed could evolve to a much bigger 
impact on the future functioning of the internal market, even though estimates are not available.  

The CJEU is called to rule on whether the Plato degree of sweetened / flavoured beer should be 
measured  by  considering  the  'real  extract'  (approach  B1)  or  the  'present  extract'  (approach  B2). 
The  awaited  judgement  of  the  CJEU  on  the  prejudicial  question  of  the  Polish  court  may 
contribute  to  addressing  -  and  eventually  clarifying  -  the  policy  problems.  At  the  moment,  the 
baseline scenarios will be different for the MS, depending on which method of measuring Plato 
degrees they apply. Regardless of the ruling, some MS will need to adapt the methods in order to 
comply  with  the  ruling.  The  extent  to  which  the  CJEU  ruling  will  change  the  status  quo  is 
therefore presently unknown.  

2.7.  Conclusion 

It is apparent from the analysis of the problems above that the functioning of the current system 
for alcohol and alcoholic beverages is causing disturbance to both MS and businesses. These are 
problems  that  are  exacerbated  by  the  increase  in  cross-border  activity  that  is  the  result  of 
globalisation of the economy and the extension of the EU (from 12 to 28 MS) since the Directive 
was adopted. In some cases this also provides greater opportunities for fraudsters.  

3.  WHY SHOULD THE EU ACT? 

In analysing the problems and the problem drivers it is clear that the Directive in general works 
well and provides an EU-wide system of uniformity and harmonised conditions that are necessary 
to  ensure  the  proper  functioning  of  the  internal  market.  Despite  the  shortcomings  described  no 
alternative  national,  bilateral  or  other  international  initiative  would  provide  the  same  level  of 
effectiveness in terms of the functioning of the internal market and the monitoring and control of 
excisable  alcohol,  and  significant  added  value  consequently  accrues  from  establishing  common 
definitions and rules of alcohol and alcoholic beverages for excise purposes at EU level.  

When looking at the provisions related to denaturing alcohol and in particular PDA, the source of 
the current complications lays precisely in the absence of clear rules at EU level. Aligned to this, 
and  because  of  that  ambiguity,  the  MS  are  interpreting  those  current  rules  differently,  and 
businesses therefore take advantage of the more flexible approaches used in certain MS. There is 
a lack of clear understanding of the rules on mutual recognition of denaturing methods between 
MS,  which  also  causes  administration  problems  for  authorities  and  businesses  alike.  MS 
themselves highlighted the need for clear rules on the exemption of denatured alcohol. One MS 
noted for example that the “definition of rules at this [EU] level is of utmost necessity, otherwise 
each  MS  will  have  its  own  system,  according  to  its  national  interests,  and  that  will  only 
complicate matters.” Another MS remarked that “a common system established at EU-level will 
help  the  functioning  of  the  common  market  and  facilitate  equal  treatment.  However,  any  rules 
must be detailed and clear enough to ensure they are interpreted the same way in all MS.” The 
evidence from both Studies showed that clear rules, common for all MS would protect the single 
market. No bilateral or multilateral agreements could have the broad EU impact.  

23 

http://beer.drinks-business-review.com/news/demand-for-low-or-non-alcoholic-beer-to-grow-in-europe-through-2020-
030117-5708450 (last accessed on 10 July 2017) 

25 

 
 
                                                 
Decisions taken unilaterally by MS, such as issued BTIs for certain alcoholic beverages, create 
additional  complexity.  A  solution  that  would  clarify  the  scope  of  the  current  categories  in 
agreement  of  all  MS  would  provide  a  much  more  effective  solution.  Although  rulings  of  the 
CJEU established criteria to classify borderline products from genuine OFBs, the subjectivity of 
the criteria has magnified the classification uncertainties. The Ramboll evaluation remarked that 
although little quantifiable data was available for analysis, taking up effective measures to resolve 
difficulties  in  classifying  alcoholic  beverages  for  excise  purposes  would  reduce  administrative 
costs  both  for  the  Member  States’  administrations  and  for  the  economic  operators  involved.  It 
concluded there is significant added value from establishing common definitions of alcohol and 
alcoholic beverages for excise purposes at EU level. 

When it comes to the reduced rates for small breweries, used by many MS, the lack of clarity of 
the  term  'independent  brewer'  and  the  cross-border  implementation  of  the  reduced  rates  is 
problematic. In the Ramboll evaluation twenty MS strongly agreed that setting the basic rules at 
EU  level  would  support  the  application  of  an  uniform  approach  and  would  avoid  distortion  of 
competition.  Furthermore  the  fact  that  this  relief  does  not  apply  to  small  producers  of  other 
products also distorts competition within and between MS.  

The reduced rates for low strength alcohol are irrelevant for most beverages as a result of other 
Union law. The threshold for beer does not encourage brewers developing low strength beers. BE 
and SE supported reduced rates for low strength alcohol in the Ramboll evaluation as they allow 
for  the  promotion  of  alternatives  containing  less  alcohol.  In  their  opinion  this  is  better  for 
consumers'  health  and  is  working  towards  a  system  of  taxing  products  based  solely  on  their 
alcoholic content.  

With regards the measurement of Plato degree of sweetened / flavoured beer, the source of the 
current  complications  lays  precisely  in  the  absence  of  clear  rules  for  'finished  product'  at  EU 
level. Because of that ambiguity, the MS are interpreting those current rules differently. 

As  with  the  subsidiarity  test,  it  is  not  possible  for  MS  to  address  the  problems  and  problem 
drivers in isolation without a proposal to amend the structures Directive. 

In conclusion, if the problems at hand are to be addressed in a coherent and meaningful fashion it 
can only be achieved through a legislative proposal supported by some non-legislative guidelines. 
Therefore, it is necessary for the Commission, which has responsibility for ensuring the smooth 
functioning of the internal market and promoting the general interest of the European Union, to 
propose  action  to  improve  the  situation.  The  legal  basis  is  Art.  113  of  the  Treaty  on  the 
Functioning of the European Union (TFEU). 

4.  WHAT SHOULD BE ACHIEVED? 

As  explained  in  detail  under  the  problem  definition,  given  the  broad  scope  of  Directive 
92/83/EEC covering a variety of products and provisions, the problem areas under this initiative 
are,  for  the  main,  very  divergent  from  one  another,  requiring  dedicated  specific  analysis.  The 
complex  structure  of  this  report  is  illustrated  in  Figure  2.  As  a  result,  the  objectives  are  also 
drawn up in such a way that they correspond only to specific problems/drivers.  

4.1.  General objectives 

The  spirit  of  Directive  92/83/EEC  and  its  general  objective  is  the  proper  functioning  of  the 
internal market for alcohol and alcoholic beverages. In the context of this initiative, this objective 
is  complemented  by  two  other  general  objectives,  which  were  identified  applicable  during  the 
evaluation: safeguarding the revenues of the MS and contributing to protection of human health. 

26 

 
 
 
The  last  two  objectives,  although  not  directly  relevant  to  all  problem  areas,  are  particularly 
important  for  some  of  them,  as  shown  in  Figure  2.  It  was  therefore  important  to  have  them 
included in the scope of the analysis and propose measure with the aim of achieving them.  

The general objectives behind the initiative are therefore as follows: 

 

 
 

ensuring the proper  functioning  of the internal market for alcohol and alcoholic beverages, 
free and undistorted movement of such goods within the EU (Art. 26 and 113 TFEU);  
safeguarding the revenue of MS; 
ensuring human health protection in Union policies and activities (Art. 168 TFEU).  

4.2.  Specific objectives 

The general objectives translate – albeit not one-to-one (see Figure 2), into the specific objectives, 
which can be defined as follows: 

  ensuring  fair  treatment  and  similar  economic  conditions  for  businesses  across  all  alcohol 

sectors, including small producers of all alcohol types; 

  preventing and correcting any distortions of competition in the application of the exemption 
for  different  types  of  denatured  alcohol,  of  the  excise  duty  for  sweetened  beer,  and  of  the 
reduced rates for low strength alcohol and small producers; 

  providing  clear  rules  on  the  scope,  classification  and  calculation  of  excise  duties  for 

businesses and MS 

  providing clear and efficient conditions to determine denaturation procedures for all types of 

 

denatured alcohol;  
reducing administrative burden and compliance costs for businesses and tax authorities, and 
providing  legal  certainty  specifically  in  the  area  of  classification  and  the  exemption  for 
denatured alcohol;  

  strengthening the fight against fraud and tax evasion (including excise duty circumvention), 
through  clear  and  consistent  framework  governing  the  calculation  and  collection  of  excise 
duties. 

5.  WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? 

5.1.  Link between problems/drivers and options 

As detailed in section 2.1, the problems analysed in this report touch upon 4 distinctive areas: (i) 
exemptions for denatured alcohol, (ii) classification of certain alcoholic beverages, (iii) reduced 
rates  for  small  producers  and  low  strength  alcoholic  beverages,  and  (iv)  measurement  of  Plato 
degree of sweetened/flavoured beer. These distinct problems, and their underlying drivers, need 
to  be  addressed  in  different  ways,  which  influences  the  chosen  aggregation  of  impacts  into 
individual  sets  of  measures  targeting  specific  issues  to  be  bundled  together  at  the  end  of  the 
analysis into packages.  

To illustrate this better, improving the provisions of Directive 92/83/EEC may be the solution to 
resolve some of the problems; for others, the solution may be found in legislation that is outside 
the scope of the present initiative. There are also specific areas where no alternatives other than 
acting/no-acting could have been identified. The report considers all possible policy options but 
focuses its analysis on the ones, which have been retained for the policy-makers. The reasons for 
discarding  some  options  early  on  as  well  as  considerations  and  constraints  behind  others  are 
presented under each cluster.  

27 

 
 
 
 
 
 
 
 
For  better  illustration  of  the  problems,  their  drivers,  objectives  and  corresponding  options  are 
presented  in  Figure  2  below.  The  baseline  scenarios  have  not  been  included  in  this  figure 
although they are systematically described under each policy cluster and constitute the framework 
against which all options will be assessed. 

28 

 
 
Figure 2 – Overview of the intervention logic 

 
 
5.2.  Dysfunctions in the application of exemptions for denatured alcohol 

When  looking  to  resolve  the  issues  with  denatured  alcohol,  there  is  a  need  to  balance  between 
harmonising  the  understanding  of  the  provisions  to  reduce  the  effects  of  the  differing 
interpretation,  maintaining  flexibility  for  producers  and  users  of  denatured  alcohol  to  have 
denaturants  that  match  their  products,  and  ensuring  that  customs  authorities  can  implement 
sufficient control to limit the risk for abuse of the exemptions. 

Ideally full harmonisation of CDA formulations would be the obvious policy option to resolve the 
legal uncertainties that persist around the mutual recognition of CDA. This would entail: 

  Agreement  on  a  single  formulation,  containing  the  same  denaturants  in  the  same 

concentration for CDA across the entire EU; 

  Elimination of all remaining national formulations; 
  Potentially a significant change in the wording of Article 27(1)(a) and 3 and 4, to reflect a 
new procedure for defining the common formulation, which would supersede the current 
process of notification by the MS. 

There  is  strong  opposition  from  a  limited  number  of  MS  to  the  full  harmonisation  of  CDA 
formulations. Even those in favour of full harmonisation may wish to retain control over possible 
future changes and therefore would not agree to a change to the notification process of Articles 
27(3) and (4). Furthermore, findings of the Ramboll evaluation do not suggest that there should 
only be one denaturing method, neither to prevent fraud, nor to ensure fair competition between 
economic operators. Therefore this option will not be assessed further in this impact assessment 
due to the fact it is unlikely to be feasible at this time. 

5.2.1.  Option 0 – baseline scenario 

The adoption of Regulation 2017/2236 on the mutual recognition of procedures for the complete 
denaturing  of  alcohol  for  the  purposes  of  exemption  from  excise  duty  will  greatly  reduce 
problems arising from the unclear rules on recognition of CDA formulations. The possibilities for 
fraudsters  to  use  the  'weakest'  formulation  will  be  reduced  by  the  replacement  of  national 
formulation  by  the  Eurodenaturant  and  thereby  reducing  the  risk  of  fraud  with  CDA  overall. 
However,  the  problems  will  not  be  fully  eliminated  and  MS  could  re-introduce  national  CDA 
formulations, if they wish to.  

The proliferation of national approaches to PDA will continue and possibly intensify for biofuels, 
which accounts for the largest proportion of PDA. Divergent interpretations in the area of PDA 
are likely to remain despite the exploratory work carried out by the Fiscalis Project Group and the 
uncertainty for cross-border trade will continue.   

5.2.2.  Option 1 –clarify mutual recognition of CDA 

This  option  would  clarify  the  rules  in  the  Directive  for  mutual  recognition  of  CDA  in  order  to 
eliminate  divergent  interpretations.  The  identified  possible  approaches  to  clarify  mutual 
recognition are the following: 

'Hybrid' mutual recognition (option 1.a): Each MS would have to recognise CDA produced in 
another MS using the formulations notified by that particular MS, but not those notified by any 
other  MS.  This  would  mean  that  MS  retain  control  over  the  CDA  produced  within  their 
territories, while being obliged to also exempt any CDA legally produced in another MS.  

Full mutual recognition (option 1.b): All MS would have to recognise all procedures notified by 
all  MS,  irrespectively  of  where  the  alcohol  was  produced  /  denatured.  This  would  effectively 

30 

 
 
eliminate all national differences, and mean that a formulation notified by a given MS could be 
used by producers across the EU, and the resulting alcohol recognised as completely denatured 
by all MS.  

Limited mutual recognition (option 1.c): Each MS would only be obliged to recognise its own 
formulation(s), irrespectively of where the alcohol was produced  / denatured. This would mean 
that  a  producer  in  a  given  MS  would  have  to  use  different  CDA  formulations  for  different 
national markets.  

To illustrate the difference between the three approaches, consider the example of the remaining 
CZ  national  formulations:  under  the  most  ambitious  approach  1.b,  all MS  would have  to  allow 
their economic operators to use these formulations. Under the approach 1.c, alcohol denatured in 
CZ using these formulations would not have to be recognised as CDA by any other MS, although 
producers  in  other  MS  would  be  able  to  produce  and  export  this  to  CZ  as  CDA.  Under  the 
approach 1.a, the CZ formulations could only be used in CZ, but alcohol denatured in CZ using 
these formulations would have to be treated as CDA and therefore exempted by all MS. 

The  approach  1.b  would  effectively  turn  the  remaining  national  formulations  into  additional 
Eurodenaturants,  which many MS would not  accept  due to  the concerns over the robustness  of 
some  formulations,  which  in  their  eyes  hampers  the  national  objectives  of  combatting  fraud  or 
protecting  health.  Approach  1.c  on  the  other  hand  would  be  more  restrictive  than  the  current 
situation  and  authorities  would  face  enforcement  difficulties.  Due  to  the  lack  of  political 
feasibility  for  full  mutual  recognition  and  the  restrictive  characters  of  the  limited  mutual 
recognition, both of these options are discarded and will not be analysed further. The remaining 
option 1.a will be hence on presented simply as Option 1.  

5.2.3.  Option 2 – Harmonisation of PDA formulations 

While full harmonisation is the preferred policy option to resolve the problems for PDA, this is 
currently  not  feasible  despite  the  exploratory  work  carried  out  with  the  Fiscalis  Project  Group. 
This is due to the numerous national approaches which are currently extremely different and MS 
have  indicated  that  they  are  not  prepared  to  substantially  alter  their  approach.  Therefore  this 
option will focus on partial harmonisation of PDA formulations and would consist of developing 
an harmonised list by the existing FPG or another expert group, that is applicable across the EU. 
This  would  enable  MS,  subject  to  certain  conditions,  to  authorise  different  formulations,  not 
included on the list, for specific uses where the fiscal risk is demonstrably low. This option would 
involve both a regulatory and non-regulatory aspect. The new approach would be included in the 
Directive.  In  addition  criteria,  guidelines  and  procedures  would  need  to  be  adopted  for 
determining low fiscal risk and amending the harmonised list. For this reasons the non-regulatory 
measures alone would not be a viable option to be deployed individually and is not considered as 
such in this analysis. 

5.2.4.  Option 3 – Confidence / capacity building measures 

This option focuses on increasing trust and confidence between MS. Some stakeholders believe 
the current difficulties regarding the treatment of PDA are created due to a lack of trust between 
MS authorities. This arises due to the different supervisory approaches and a suspicion that some 
countries'  procedures  and  formulations  are  ineffective.  It  has  been  suggested  that  this  could  be 
resolved  by  increased  information  sharing,  working  visits,  twinning  or  exchanges.  A  separate 
option proposed by the Study involves the creation of a national PDA database. This option will 
not be analysed as the European alcohol denaturant database which is accessible to MS national 
authorities  and  the  Commission,  already  exists.  Currently  this  database,  which  had  fallen  into 
disuse  by  some  MS,  is  being  updated  by  all  MS.  An  update  to  the  database  would  enhance 

31 

 
 
 
transparency and allow economic operators to check whether a given formulation they would like 
to  supply  or  procure  is  authorised  in  the  relevant  MS,  thereby  enhancing  legal  certainty  and 
reducing barriers to trade.  

5.2.5.  Option 4 – Legal clarification of terms relating to PDA 

The purpose of this option to clarify the legal base that relates to PDA (Art. 27(1)(b)). Overall the 
clarity  of  the  legal  base  could  be improved.  In  addition  the  terms  'used  for  the  manufacture  of' 
and 'finished product' would be clearly drafted. This would reduce the risk of divergent / arbitrary 
interpretations across the EU and ensure equal treatment of goods containing PDA.   

The clarification of 'finished product' is particularly challenging as a finished product across the 
various  product  groups  (i.e.  cosmetic  product  and  screenwash)  is  extremely  diverse.  The 
clarification  would  make  reference  to  a  'recognisable  finished  product'  or  'finished  product'  in 
order to provide MS with flexibility for the various product groups using PDA. This option could 
also define a quantitative line above which a product containing denatured alcohol must always 
be classified as CN 2207 20 00 (and therefore be considered an excise good and treated as such, 
similar to the clarification of mixtures containing ethyl alcohol used as raw material to produce 
fuels for motor vehicles24.) This could be included as an amendment to the Directive or defined 
via a Commission Implementing Regulation (CIR) and / or a note to the CN). This option could 
also require such alcohol to move in accordance with Chapter IV of Directive 2008/118/EC. This 
option  will  focus  on  the  latter  amendment  to  the  Directive  in  the  interest  of  clarity  and  legal 
certainty.  

All  options  put  forward  and  retained  are  complementary  and  could  be  deployed  together, 
affecting different aspects of the problem with denatured alcohol. 

5.3.  Dysfunctions in the classification of certain alcoholic beverages 

5.3.1.  Option 0 – baseline scenario 

It  is  expected  that  national  custom  authorities  will  continue  to  adopt  alternative  methods  for 
classification to deal with the subjective criteria given by the CJEU. It could also be envisaged 
that to solve the dilemmas created by innovative products which it is generally agreed should not 
benefit from the preferential treatment, MS could resort to unilaterally changing the rate of excise 
tax  of  OFB  in  order  to  bring  the  expected  tax  due  under  this  category  approximately  into  line 
with that applying to beverages of similar strength and falling under ethyl alcohol. If it came to 
this, MS acting purely to protect their national interests, would further erode the very rationale for 
the  establishment  of  the  category.  As  the  current  specifications  of  the  EMCS  lack  the  OFB 
category  to distinguish OFB from  wine  (W200),  moving  away from an equivalence  of taxation 
between wine and OFB would create an inconsistency within the system. These approaches are 
non-harmonised and the risk of different legal interpretations is likely to persist or grow, leading 
to different classifications and more abuse.  

The adoption of a new note to Chapter 22 of the CN code to guide the classification may assist in 
reducing  the  uncertainty.  However,  the  CN  code  is  outside  the  remit  of  excise  duty  authorities 

24   Commission Implementing Regulation (EU) No 211/2012 of 12 March 2012 concerning the classification of certain goods in 
the Combined Nomenclature, OJ L 73, 13.3.2012, p. 1–2) and 626/2014 (CIR (EU) No 626/2014 of 10 June 2014 amending 
Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs 
Tariff, OJ L 174, 13.6.2014, p. 26–27). 

32 

 
 
                                                 
and  furthermore  the  notes  to  the  CN  code  are  not  binding.  Therefore  this  could  furthermore 
increase the risk of disparities of interpretation.  

Monitoring  and  evaluation  of  the  French  Soprano  classification  system  launched  in  2017  (see 
section 2.4.3)  is  necessary before proposing  an EU wide adoption.  Besides the fact, Soprano is 
only in its infancy, this platform is based on the FR approach to classification and therefore the 
risk  of  different  legal  interpretations  together  with  ensuing  disputes  and  incentives  to  develop 
products exploiting the ambiguity, persists.   

Competitive  advantages  for  businesses  with  a  favourable  tax  classification  obtained  by 
'classification shopping' are likely to continue. Moreover, due to the high costs, businesses will 
remain  risk-wary  towards  the  placement  of  new  products  on  the  market  without  formal 
classification from customs authorities.  

MS  will  also  continue  to  adopt  national  legal  and  administrative  provisions  to  ensure  a  certain 
margin of tolerance for the addition of AFC. It is expected that MS with no formalised approach 
will  also  adopt  domestic  measures  for  AFC,  with  increasing  cross-country  disparities.  The 
ambiguity with the legal text of the Directive would persist. 

5.3.2.  Option 1 – clarify the excise duty structure for 'borderline' products 

This approach consists of refining the current definition of certain excise duty categories so as to 
reduce  the  risk  of  disparities  of  treatment  and/or  unduly  favourable  treatment  of  ‘borderline’ 
products, but without changing the five-category fundamental structure of the Directive. 

The  tax  classification  of  these  products  would  not  be  so  strictly  determined  by  the  customs 
classification.  The  excise  definition  of  products  should  evidently  remain  linked  to  the  CN 
heading, but the criteria that today determine if a borderline product should fall under Art. 20 or 
not  could  be  established  explicitly  in  the  tax  legislation  rather  than  derived  from  the  prior  CN 
code. Under the current system it is the customs classification which determines the excise duty 
category. Once a beverage is classified as CN 2208 (undenatured ethyl alcohol) it can be taxed 
only  under  Art.  20  (ethyl  alcohol).  If  classified  as  CN  2206  (OFB)  it  may  fall  under  Art.  12 
(OFB) or Art. 17 (IP) depending on its strength, but not under Art. 20. 

This  would  translate  into  introducing  in  the  Directive  the  same  CJEU  principle  that  currently 
inform  CN  classification,  which  establishes  that  a  fermented-base  beverage  that  has  lost  its 
essential character (taste, smell, and appearance) can be assimilated to a distilled-base beverage, 
and  subject  to  excise  duty  in  accordance  with  Art.  20.  This  approach  would  require  an 
amendment to the text of the Directive, so that: 

  products that have lost their essential fermented character would be excluded from the scope 

of Art. 12 and 17; and 

  products classified under CN 2206 of any ABV strength would be allowed under Art. 20 (the 

denomination of the category might be revised accordingly). 

Under  this  approach,  MS  may  consistently  tax  any  ‘borderline’  product  under  Art.  20  that  is 
considered  as  having  lost  its  essential  fermented  character,  regardless  of  the  fact  that  it  comes 
under CN 2206, with or without a BTI. 

A further clarification of the excise structure would propose adopting a flexible approach toward 
AFC,  allowing  the  addition  of  ethyl  alcohol  of  agricultural  origin  to  products  of  ‘entirely 
fermented  origin’  (wine  and  OFB)  to  dilute  or  dissolve  colorants,  flavourings  or  any  other 
authorised  additives  and  not  exceeding  the  dose  strictly  necessary.  The  principle  can  be 
established in the Directive in generic terms, as in Regulation 251/2014, or setting an upper limit 

33 

 
 
 
 
to  the  maximum  contribution  of  AFC  to  the  total  ABV  of  the  final  products.  This  clarification 
would have limited impact on the disparities of treatment of 'borderline' products and may have 
unintended consequences for certain aromatised wine products. This element will not be assessed 
further in this impact assessment.  

5.3.3.  Option 2 – introduce a differentiation in the OFB tax category 

This policy option consists of a possible extension of national approaches to the EU-level, which 
are 

  distinguish  for  tax  purposes  traditional  cider  and  other  products  defined  in  country-level 
sectoral legislation, from all other generic OFB, including ‘mass-market’ cider and the like  
  apply  additional  consumption  taxes  on  specific  categories  of  mixed  drinks  to  deter  their 

consumption 

the 

intention  of 

legislator  from 

These approaches aim to differentiate the OFB products that arguably correspond to the original 
that  have  been 
definition  and 
opportunistically  designed  to  fit  into  it  or  simply  that  do  not  fit  elsewhere.  In  fact,  the  two 
existing  approaches  have  the  same  objective  and  result.  The  only  difference  between  them 
regards which ‘sub-category’ is separately defined and excerpted from the standard one – i.e. the 
‘mixed drinks’ (intended as ‘pre-mixes, alcopops etc.) or the ‘cider and perry’. In visual terms, 
the  two  approaches  can  be  represented  as  in  Figure  3  below,  where  their  difference  concerns 
where the demarcation line is drawn, namely: 

the  ‘novel’  products 

  Line  A  (Option  2.a):  cider  and  perry  (and  specific  OFB  like  mead,  hydromel,  certain  fruit-
wine  etc.)  v.  Other  OFB  (including  mixed  drinks  and  possibly  certain  ’borderline’  cider 
drinks). 

  Line B (Option 2.b): mixed drinks (pre-mixes, alcopops and the like) versus cider, perry and 

any other non-mixed OFB of any kind (‘traditional’ or not).   

Figure 3 – The two possible approaches for differentiating the OFB category   

Cider, perry etc. 

Other OFB 

Mixed drinks Premixes, 
alcopops etc. 

A 

B 

The demarcation Line A would require adoption at EU level of a harmonised definition of cider, 
perry and the other OFB that correspond to the original scope of this category, matching as much 
as  possible  with  the  existing  national  definitions  for  these  products.  The  demarcation  Line  B 
would require a harmonised definition to be adopted at EU level defining a mixed drink and the 
relevant criteria to allow for such a categorisation. 

With the exception of FR, where both differentiation lines are in place, all other MS have opted 
for  only  one  distinction.  In  this  impact  assessment,  the  third  approach  (based  on  the  French 
practice),  is  not  proposed  as  introducing  two  differentiations  would  excessively  fragment  a 
category that is currently small.  

5.3.4.  Option 3 – provide operational definitions, criteria and methods  

Common  rules  and  criteria  would  be  necessary  to  establish/determine  when  a  product  has 
actually  lost  its  essential  fermented  character  irrespective  of  any  legal  changes  to  the  excise 

34 

 
 
 
 
 
classification.  Such  criteria  should  not  be  in  the  text  of  the  Directive  but  defined  in  detailed 
operational terms in guidelines, recommendations and/or explanatory notes to CN nomenclature.  

Many tax administrations interviewed in the context of the supporting studies were of the opinion 
that a proper operationalisation of these criteria or any solution sought at the level of excise duty 
classification  would  fail,  because  there  are  uncertainties  in  the  primary  underlying  CN 
classification. What is currently included in the explanatory note to CN 2206 00 reportedly leaves 
a  wide  margin  for  subjective  interpretation.  Simply  introducing  the  CJEU  jurisprudence 
principles  in  the  Directive  would  still  require  clear,  agreed,  and  robust  criteria  and  analytical 
methods to be in place. Such criteria, conditions and methods could be established:  

at  the  level  of  CN  explanatory  notes  (option  3.a)  or,  in  any  case,  within  the  customs 
classification  system  (revision  of  the  CNEN  2206  00)  where  a  robust  distinction  between 
fermented alcoholic products that may fall under CN 2206 and those that should be considered 
CN 2208 could be provided. A customs expert group (Customs 2020 Project Group) is currently 
discussing and drafting an implementing regulation to create a new additional note to Chapter 22 
of  the  CN  code  to  guide  the  classification  of  these  alcoholic  products.  This  note  will  focus  on 
distinguishing  between  the  CN  codes  and  will  also  touch  upon  classification  of  new  products 
using  cleaned-up  alcohol.  The  draft  implementing  regulation  is  scheduled  for  vote  in  the 
Committee meeting of June 2018. 

through non-binding guidelines (option 3.b) –guidelines would be developed by a joint technical 
working group and adopted at ITEG level. These guidelines should, among other things: 

o  establish  the  criteria  to  differentiate  between  a  ‘genuine’  fermented  beverage  and  a 
beverage  that  has  lost  its  essential  character,  which  should  be  classified  otherwise  and 
provide guidelines to indicate how to weigh and balance the different aspects; 

o  set a threshold for the amount of distilled alcohol that can be added to a fermented beverage 
both  in  terms  of  contribution  to  the  total  ABV  and/or  overall  volume  of  the  end-product, 
and other parameters related to the appearance and taste of the product; 

o  establish  if,  and  to  what  extent,  the  addition  of  other  substances  like  water,  sugar,  cream 
etc. may per se affect the fermented character of a beverage or not, and the criteria thereof; 

o  establish analytical parameters to deal with ‘cleaned-up’ alcohol, both as an end-product or 

a base for other beverages; 

o  define  common  analytical  methods  to  assess  the  composition  of  products  in  order  to 

improve detection capacity and reduce uncertainties in laboratories’ outcome.  

These  measures  presented  above  do  not  require  a  revision  of  the  Directive  and  can  be  self-
standing  options.  They  are  however  not  strictly  alternative  to  options  1  and  2,  but  rather 
complementary and in some case a pre-requisite for a successful implementation of the proposed 
Directive amendments.  

5.3.5.  Option 4 – amend other EU legislation  

Sectoral  regulation  for  cider  and  other  specific  OFB  (option  4.a).  This  option  envisages 
adopting  at  EU-level  a  harmonised  definition  of  cider,  perry  and  other  specific  OFB  to 
distinguish them from other generic OFB like mixed drink, which are arguably taking advantages 
of the blurred boundaries of the current excise duty definition. This would complement option 2 
above,  which  proposes  a  differentiation  in  the  OFB  category  and  would  ensure  the  smooth 
operation  of  reduced  rates  for  small  cider  makers,  if  reduced  rates  for  small  producers  was 
extended to include small cider makers (see section 5.4.3 below).  

35 

 
 
Enhance monitoring and control (option 4.b). This option proposes introducing separate codes 
for OFB. This would address the lack of a specific EPC for OFB which is currently merged with 
wine. This amendment concerns Annex II, Table 11 (Excise Product) of Commission Regulation 
684/200925, as well as of the EMCS and related systems, including MS authorities and businesses' 
excise systems.  

A further aspect of this option proposes introducing, for statistical purposes, a collection of more 
granular data on excise goods volumes than current data, which is articulated only on EPC, and 
does not cover zero-rate products. This would assist tax authorities, who currently have a limited 
market  intelligence  of  novel 
'borderline'  products  to  address  problems  effectively  and 
consistently.  This  aspect  will  be  discarded  as  the  current  procedures  and  administrative 
arrangements in MS vary substantially and an  one-size-fits-all approach is not possible. Further 
consultation with MS would be necessary to introduce this.  

5.4.  Dysfunctional application of reduced rates 

5.4.1.  Option 0 – baseline scenario 

The unequal treatment of producers of alcoholic products other than beer and spirits will persist. 
MS will be unable to correct this. Divergent interpretations in the area of economic independence 
and the uncertainty for cross-border trade are likely to increase as the number of small brewers 
continue to grow, which  currently shows no sign  of slowing. Conflicts between businesses and 
authorities will persist and may even increase as business structures increase in complexity.   

The application of reduced rates to low strength alcoholic beverages will continue to apply to a 
limited number of beer products. MS will be prevented from achieving national policy objectives 
of encouraging consumers away from high strength alcoholic beverages.    

5.4.2.  Option 1 – Increase legal certainty for small breweries  

The  main  regulatory  failures  for  small  brewers  concern  (i)  the  existence  of  grey  areas  in  the 
definition of economic independence; and (ii) the implementation of the provision to cross-border 
businesses. This option would clarify the term 'legally and economically independent' and would 
provide a common EU method for proving the status of producers. 

Option 1.a – Normalising the definition of economic and legal independence at the EU level  

To address the problems described earlier, the term 'economic and legal independence' should be 
defined at EU-level. Such definition would encompass the general norms and principles as well 
as  detailed  technical  specification  outlining  the  legal  conditions  which  could  determine  if 
companies  are  independent  or  not. Some  aspects  have  already  been clarified  and several  CJEU 
jurisprudence  provide  for  the  necessary  guidance,  which  has  been  developed  and  consolidated 
over the years. Any further action would therefore refer to the existing acquis as much as possible 
while any gaps – e.g. with regard to the forms of cooperation – would need to be addressed. This 
could  be  done  by  consolidating  the  current  practices  on  beer  brewed  under  license  –  and  the 
present national practices – as well as contract brewing.  

Definition of economic and legal independence of small breweries could be done either through a 
legislative revision (option 1.a.1.) of the Directive or by means of a soft law instrument (option 

25   Commission  Regulation  (EC)  No  684/2009  of  24  July  2009  implementing  Council  Directive  2008/118/EC  as  regards  the 

computerised procedures for the movement of excise goods under suspension of excise duty. 

36 

 
 
                                                 
1.a.2),  such  as  non-binding  guideline.  Whereas  these  2  instruments  would  in  essence  yield  the 
same framework, they would differ in the effectiveness. It is therefore important for the analysis 
to retain that distinction for further comparison and identification of the preferred choice. 

Option 1.b – Creating conditions for recognition of small brewers across borders 

With  respect  to  the  means  for  proving  the  status  of  small  brewers  and  the  modalities  for  the 
exchange  of  information  between  tax  or  customs  authorities,  these  could  be  specified  along 
different, possibly complementary, lines: 

Ex-ante  approach  (1.b.1):  all  small  brewers  would  be  identified  through  a  uniform  certificate, 
defined  via  a  Commission  Implementing  Regulation,  which  would  need  to  be  presented  when 
claiming reduced rates in a MS other than that of establishment. Such a certificate would state: (i) 
the  brewery  output  level,  as  already  communicated  or  available  to  the  customs  authority  under 
tax warehouse obligations; and (ii) whether the brewer fulfils the criteria for economic and legal 
independence,  based  on  additional  documentation  submitted  by  the  economic  operator.  This 
certificate  should  be  provided,  upon  request,  by  all  customs  authorities  to  all  businesses  up  to 
200,000 hl, regardless of whether they can access reduced rates in their country of establishment. 
This certificate could be developed through the Fiscalis programme. 

Ex-post approach (1.b.2): as in the current framework, a verification of whether a non-domestic 
brewer  meets  the  conditions  for  enjoying  reduced  rates  would  be  done  upon  request  of  the 
authority of the MS of destination for specific players. However, these ex-post checks would be 
managed by an IT platform for the exchange of information, so that the authorities in the country 
of destination could inquire about an operator’s annual output and independence. Alternatively, 
each customs authority could prepare a list of breweries which are both independent and with an 
output below 200,000 hl. Experience with the European alcohol denaturant database shows that 
this option would be of limited benefit, as MS often fail to update the data regularly. This option 
will not be assessed further in this impact assessment.  

5.4.3.  Option 2 – Extending the reduced rates to small cider makers 

To  address  the  unfair  competition  between  small  producers  of  alcoholic  beverages,  this  option 
would amend the Directive to extend the reduced rates to small cider makers.  

As for the small brewers reduced rates, this reduced rate would remain optional for MS. It would 
be based on the definition of an independent producer and a maximum discount rate compared to 
the  standard  rate  would  be  fixed.  The  maximum  yearly  output  threshold  would  be  set  in  the 
Directive.  One  possible  output  threshold  (100  hectolitres  per  year)  would  cover  micro  cider 
makers only. The second option would apply an output threshold of 15 000 hectolitres per year, 
which would extend the relief to small cider makers. 

5.4.4.  Option 3– Revised thresholds for low strength alcohol 

This option aims to amend Art. 5(1) of the Directive and allow MS to apply reduced rates to beer 
with an ABV not exceeding 3.5% vol (instead of 2.8% vol). 

5.5.  Measurement of Plato degree for sweetened / flavoured beer 

5.5.1.  Option 0 – baseline scenario 

Under  this  option  MS  will  continue  to  have  freedom  in  the  interpretation  of  the  term  'finished 
product' when measuring the degree Plato of sweetened/flavoured beer.  

37 

 
 
A case has been referred to the CJEU (C-30/17 - see Box 5) regarding the way in which excise 
duties  on  sweetened  /  flavoured  beer  should  be  determined.  The  precise  scope  and  extent  to 
which the CJEU will clarify the outstanding uncertainties of the Plato situation is unknown. If the 
CJEU rules contrary to the existing practice of measuring Plato degree after the addition of sugar, 
several Member States would be required to change their approach. 

5.5.2.  Option 1 – Legal clarification of term 'finished product' 

This  option  implies  clarification/definition  of  the  notion  of  'finished  product'  and  when  the 
measurement of Plato degree should occur when it comes to beer in the legal base (Art. 3(1) of 
the Directive). Defining 'finished product' could be done following any of the methods currently 
applicable to measuring the Plato degree:  

  Option 1.a – regulatory amendment of the term ‘finished product’ where it would refer to the 

base beer before adding any additives, i.e. Approach A of measuring degrees Plato; 

  Option 1.b – regulatory amendment of the term ‘finished product’ where the term would refer 
to the end-product that is released for consumption. This can be further subdivided in line with 
the  two  approaches  B1  and  B2  depending  on  whether  the  sugar/flavour  added  after 
fermentation would contribute (option 1.b.2) or not (option 1.b.1) to the Plato degree. 

5.5.3.  Option  2  –  Guidance/recommendation  on  the  most  appropriate  method  to 

measure Plato degree of sweetened/flavoured beer 

of 

the 

Plato 

degree 

The  non-regulatory  option  consists  of  providing  guidance  on  the  most  appropriate  approach  to 
measure 
non-binding 
guidelines/recommendation  of  the  Commission.  This  option  can  be  either  alternative  or 
complementary to option 1, in the sense that guidelines could also support the implementation of 
the  revised  regulatory  provision,  suggesting  technical  solutions,  procedures  and  other  best 
practices  to  national  authorities.  Similar  to  regulatory  Option  1  guidelines/recommendations 
could  be  made  based  on  any  of  the  three  methods  currently  applicable,  leading  respectively  to 
sub-options 2.a, 2.a.1 and 2.b.2.  

sweetened/flavoured 

beer 

via 

5.5.4.  Option 3 – Abolish the Plato method for measurement of alcoholic strength 

in beer  

This option would amend the Directive, so that only ABV would be allowed by MS to measure 
the alcoholic strength of beer.  

This  option  would  reduce  the  additional  administrative  costs  that  producers  measuring  the 
strength of beer using the Plato method face when they sell cross-border as they are required to 
report data to EMCS using the ABV method, even when the movement of goods occurs between 
two  MS  using  the  Plato  method.  Furthermore  in  order  to  comply  with  food  labelling 
requirements26, all producers must display the ABV strength on beer labels. 

While  this  option  would  reduce  the  legal  uncertainty,  distortion  of  competition  and  regulatory 
costs, the abolishment of the Plato method would be vigorously opposed by both the industry and 

26   Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food 
information to consumers, amending Regulations (EC) No 1924/2006 and (EC) No 1925/2006 of the European Parliament 
and of the Council, and repealing Commission Directive 87/250/EEC, Council Directive 90/496/EEC, Commission Directive 
1999/10/EC, Directive 2000/13/EC of the European Parliament and of the Council, Commission Directives 2002/67/EC and 
2008/5/EC and Commission Regulation (EC) No 608/2004 Text with EEA relevance. 

38 

 
 
                                                 
many  MS  on  grounds  of  tradition.  In  fact,  all  relevant  stakeholders  interviewed  for  the  both 
Studies  have  confirmed  that  there  are  no  negative  consequences  for  beer  producers,  because 
regulatory  costs  are  negligible  and  do  not  constitute  an  obstacle  in  practice  when  it  comes  to 
selling in another MS. Taking account of the above, this option was discarded. 

6.  WHAT  ARE  THE  IMPACTS  OF  THE  DIFFERENT  POLICY  OPTIONS  AND  WHO  WILL  BE 

AFFECTED? 

The  impacts  considered for  the  policy  options  belong  to  four  main  categories  and  span  various 
categories  (or  even  sub-categories)  of  stakeholders:  (i)  market  effects  (including  Single  Market 
functioning,  distortion  of  competition,  and  SME  competitiveness  effects);  (ii)  regulatory  costs 
and  cost  savings  (including  substantive  compliance  costs,  administrative  costs  and enforcement 
costs);  (iii)  tax  revenues;  and  (iv)  indirect  social  effects  (illegal  activities  and  fraud,  alcohol 
control policy objectives or health aspects where applicable).  

Market effects concern distortions of the quantity exchanged and of the equilibrium price of the 
various products. Taxation, by definition, distorts any market from the equilibrium that it would 
reach  based  on  the  free  adjustment  of  demand  and  supply.  For  this  reason,  the  present  impact 
analysis  does  not  assess  market distortions  per se,  but  those that  might go beyond the intended 
objectives of the legislator. Conversely, what the analysis does take into account are aspects such 
as  (1)  tax-induced  substitution  across  products,  (2)  cross-border  distortions  and  illicit  trade,  (3) 
Single Market functioning in terms of possible distortions induced by diverging legal treatments, 
uneven  application  of  the  Directive or  other  administrative  obstacles,  (4)  SME  competitiveness 
since certain impact may have a differential effects on small producers vs. large manufacturers. 

Regulatory  costs  and  savings  concern  the  broadly  understood  compliance,  enforcement  and 
administrative costs and cost savings. Compliance costs have been considered with respect to the 
changes  to  business  practices  linked  to  the  administrative  requirements.  Enforcement  costs  and 
benefits  can  either  relate  directly  to  the  costs  borne  by  public  authorities  to  apply  the  revised 
Directive provisions, or judicial costs and cost savings borne by public authorities and economic 
operators related to the need to interpret unclear legal provisions and, in case of judicial disputes, 
uphold  them  in  court,  as  well  as  benefits  (cost  savings)  in  case  interpretations  and  judicial 
disputes are no longer needed after a clarification or legal revision.  

Tax  revenues  comprise  direct  charges  including  taxes  and  fees  paid  by  economic  operators  or 
consumers.  By  nature,  tax  revenues  bear  elements  of  trade-off:  what  is  a  benefit  for  tax 
authorities  is  a  cost  for  consumers  and/or  manufacturers.  In  the  assessment  and  comparison  of 
policy scenarios these impacts where primarily examined from the perspective of tax authorities. 
Impacts  on  tax  revenues  can  be  triggered,  apart  from  the  tax  rates  which  are  not  part  of  this 
analysis, by scope of the tax system (exemptions / inclusions) and of individual tax category, with 
the  possible  re-classification  of  certain  products  in  different  categories.  It  is  also  worth 
mentioning  that  these  variations  may  also  trigger  other  impacts,  considered  under  market  or 
social effects, such as tax-induced substitution between products, per capita consumption effects, 
demand for illicit products and fraud. 

Indirect social effects include impacts that poorly lend themselves to quantification in monetary 
terms, but are nonetheless important since they concern the underlying values and principles of 
policy action that are linked to social well-being in broad sense. Two areas of social impact that 
have  been  considered  related  to  the  policy  options  at  stake  -  although  indirectly  -  namely:  (i) 
public health (through alcohol control policy and measures); and (ii) tax fraud. 

These broad impact categories constitute the general framework for impact analysis. Keeping in 
mind  the  complexity  of  the  problem  definition,  the  relative  independence  of  the  problem  areas 
with distinct drivers, consequences and corresponding objectives, it should be recalled that not all 

39 

 
 
of  the  impacts  will  materialise  for  all  the  problem  areas  and  proposed  options.  For  example, 
SME  competitiveness  is  relevant  but  to  the  problem  of  reduced  rates  for  small  producers,  the 
creation  of  a  new  fiscal  category  for  certain  product  may  generate  administrative  costs  for 
economic operators who have to update their licenses and IT systems while health aspects are of 
relevance solely for the problem of denatured alcohol. However, where impacts might have been 
relevant but their nature cannot be defined (e.g. impacts on the consumption rates of alcohol after 
re-classification or changes in the scope of reduced rates), it is clearly stated so. 

6.1.  Dysfunctions in the application of exemptions for denatured alcohol 

Mutual recognition of CDA 

Option  1  would  reduce  the  remaining  legal  uncertainties  surrounding  mutual  recognition  of 
CDA. There would be a reduction in any remaining trade barriers and market distortions as any 
restrictive  interpretation  of  mutual  recognition  by  some  MS  would  be  eliminated.  This  option 
would have no impact on most businesses, as this would only codify the approach taken by most 
MS. Some positive impacts for businesses involved in cross-border trade of CDA may also result. 
The impact of this option are summarised further in Annex 17. 

PDA formulations 

Market effects 

All options would reduce, albeit to a different extent, barriers to intra-EU trade due to the greater 
transparency  and  legal  certainty.  Option  2  would  result  in  fairer  competition  between  PDA 
producers  and  users  in  different  MS.  The  impact  of  Option  3  is  uncertain,  while  information 
sharing could lead to fewer disputes / barriers to trade, this is dependent on MS adopting more 
consistent  rules  /  practices.  Option  4  would  ensure  equal  treatment  of  PDA  for  indirect  uses 
across the EU.  

Operating costs for business / conduct of business  

Any  increase  in  harmonisation  would  be  beneficial  for  businesses  that  operate  across  the  EU. 
Option 2 may increase the access to wider range of PDA formulations and enable cross-border 
businesses to use the same PDA formulation in all MS, which would result in cost savings. There 
would be less legal uncertainty, which would reduce the risk and costs of supplying PDA intra 
EU. However this option may negatively impact businesses whose current formulation is not on 
the harmonised list.  

The  impact  of  Option  3  is  uncertain  as  confidence  /  capacity  building  measures  may  not 
necessarily  translate  into  savings  for  PDA  producers  or  users.  However  if  consistent  rules  or 
practices were adopted this would lead to a reduction in costs for businesses.   

Option  4  would  result  in  cost  savings  for  businesses  using  PDA  in  MS  that  do  not  exempt 
indirect  uses  of  PDA.  The  enhanced  legal  certainty  of  this  option  would  reduce  the  risk  of 
potentially costly disputes in the future.   

Enforcement costs 

The development of a harmonised list of PDA (Option 2) would result in a significant investment 
of resources by MS and the Commission. While this would build on the work undertaken by the 
Fiscalis Project Group, this would still be a major commitment for all stakeholders. However a 
harmonised list would reduce the burden of customs laboratories in certain MS, where fraud with 
illicit surrogate alcohol is a significant problem.  

40 

 
 
 
Option  3  would  have  some  costs  for  MS.  This  would  be  dependent  on  the  frequency  and 
intensity of information  sharing events. In  time  this may result in reduce enforcement costs for 
MS, if consistent rules were applied across the EU. 

The implementation of Option 4 would have no additional burden on MS, who currently exempt 
the  indirect  uses  of  PDA.  However  for  the  other  MS,  this  would  involve  updating  legislation, 
adopting standard procedures and familiarise staff with the new rules and guidelines, which could 
constitute a small one off cost for the national authorities.  

Fiscal fraud / Public health 

Option  2  would  not  eliminate  'weak'  formulations  of  PDA,  which  is  the  main  source  of  fiscal 
fraud  and  negative  health  impacts.  Some  impact  may  be  possible  if  a  strict  list  of  PDA 
formulations was developed and MS adopted their approaches to risk assessment and / or require 
stronger evidence before authorising an additional formulation. Option 3 would have limited, if 
any, impact on the risk of PDA fraud. Option 4 is primarily a fraud prevention measure and the 
requirement  to  move  products  containing  alcohol  over  a  suggested  limit  in  accordance  with 
Chapter  IV  of  Directive  2008/118/EC  would  give  authorities  an  effective  weapon  in  the  fight 
against fraud. The impacts of the various options are summarised in Annex 17. 

6.2.  Dysfunctions in the classification of certain alcoholic beverages 

Tax revenues 

The  reclassification  of  certain  products  would  have  direct  repercussions  on  the  tax  revenue  for 
MS.  The  magnitude  depends  on  the  actual  rates  applied  and  the  equilibrium  of  two  opposite 
effects: 

  A tax yield per product unit increases when the reclassification is to a higher taxed category 
  A higher tax results in a higher price, which has a negative impact on demand. 

Taxing  borderline  products  under  Art.  20  (Option  1)  would  result  in  a  direct  revenue  loss  of 
approximately  EUR  126  million  per  annum.  This  is  due  to  a  reduction  in  demand  triggered  by 
higher prices reflecting the higher excise duties. The clarification of the term 'entirely fermented 
origin'  would  have  a  modest  impact  on  tax  revenues  as  few  if  any  existing  products  would  be 
reclassified.  If  a  strict  threshold  was  adopted,  this  may  result  in  the  taxation  of  AFC  as  ethyl 
alcohol. 

Selecting  Option  2  (differentiation  in  the  OFB  tax  category)  may  lead  to  yet  more  direct  tax 
revenue  losses,  approximately  EUR  250  million  per  annum.  However,  this  estimate  reduces  to 
EUR 35 million if borderline cider is kept out of the reclassification process.  

On the other hand, drawing on the experience from the introduction of relatively heavy alcopop / 
premix  taxes  in  FR  and  DE,  the  medium-term  to  long-term  net  revenue  losses  may  be  much 
smaller. The introduction of a new tax in FR and DE did indeed, as expected, lead to the market 
collapsing quickly, and in a short time period the tax yield dropped to very modest contributions. 
Businesses  largely  withdrew  products  from  the  market  that  had  become  too  expensive  for  the 
consumers  and  invested  in  other  new  products.  This  was  the  case  with  spirits-based  alcopops 
which were replaced by malt- and wine-based pre-mix drinks after the introduction of the alcopop 
tax.  Assuming  similar  market  behaviour  would  follow  from  the  reclassification  (and  thus  new 
taxes), we can expect a similar process: a tax-shock would eventually result in the substitution of 
the  target  products  with  other  products  that  remained  in  the  favourable  tax  categories.  The 
expected  change  in  the  excise  duty  revenues  would  depend  primarily  on  which  other  products 
would be consumed and their level of taxation. 

41 

 
 
The non-regulatory Options 3.a and 3.b would not differ in terms of the nature of the expected 
impacts  on  the  tax  revenues.  Those  being  operational  measures,  their  deployment  –  be  it 
independently  or  in  conjunction  with  Options  1  and  2  -  may  reduce  the  risk  of  new 
misclassifications and bridge tax losses through smoother transition to new tax categories.   

Introducing  an  EU  wide  regulation  of  cider  and  other  specific  OFB  (Option  4.a)  would  have 
limited effects on tax revenues unless accompanied by the corresponding fiscal measures. The tax 
effects would depend on the final definition of cider, perry and fruit wines and could be similar to 
that  of  Option  2.  Introducing  a  new  EPC  for  OFB  (Option  4.b)  would  have  no  impact  on  tax 
revenues, however it would provide enhanced data for national authorities to understand the OFB 
market better for tax policy decisions.  

Competition and market effects 

It  is  apparent  that  the  reclassification  of  certain  products  into  a  different  tax  category  with  a 
different excise duty rate would have an impact on the market size and trends. Various steps were 
undertaken to assess the impact, which are detailed in Annex 15. 

Option  1  would  affect primarily  borderline  IP with  an estimated  reduction in  sales  volumes  of 
approximately 36%. The collapse of this market is primarily due to the introduction of a higher 
excise  duty  on  products  that  in  various  MS  enjoy  a  zero  or  very  low  excise  duty.  It  is  further 
impacted due to the fact that the demand for these products is very elastic, so consumers would 
likely switch to other cheaper products.  

The sub policy option of clarifying the term 'entirely fermented origin' would primarily have an 
impact  on  the  certainty  and  consistency  of  rules  across  MS,  but  only  limited  market  effects 
(0.3%) since the addition of AFC is, for the main, already accepted. 

Option  2  would  particularly  impact  very  low  strength  mixed  drinks  and  borderline  cider,  if 
included  in  the  reclassification.  The  analysis  estimates  a  decrease  of  between  46%  (average 
scenario for very low-strength mixed drink) and 64% (average scenario for ‘borderline’ cider) in 
sales volumes. A moderate impact is expected for mixed drinks between 5.5% and 10% as these 
products are currently taxed as IP in some MS.  

Both  options  may  result  in  unintended  effects  on  non-target  products.  Some  AWP  classified as 
CN 2206 may fall within the reclassification. Unintended effects are more profound under Option 
2. 

Overall both options have significant market impacts for the target products, since their demand 
is  sensitive  to  price.  The  estimated  decline  in  sales  is  substantial;  however  this  is  small  when 
compared  to  the  overall  alcoholic  beverage  markets  (less  than  0.4%  in  the  worst  scenario). 
Similar impacts would be seen for the non-regulatory options, which aim to clarify the conditions 
under which certain fermented beverages should be treated like spirits. 

Like above, the non-regulatory Options 3.a and 3.b would not differ in terms of the nature of the 
expected impacts on the tax revenues. Those being operational measures, their deployment – be it 
independently  or  in  conjunction  with  Options  1  and  2  -  may  reduce  the  risk  of  new 
misclassifications and bridge tax losses through smoother transition to new tax categories.   

Introducing a sectoral definition of cider and other specific OFB will have limited impact on the 
market, if its introduction is not accompanied by the corresponding amendment of the Directive. 
If the Directive is amended, the market impacts are similar to that of Option 2.  

42 

 
 
Administrative burden and enforcement cost 

The  policy  options  can  have  an  ambivalent  impact  on  administrative  costs  and  burdens  for 
businesses  and  competent  authorities.  They  intended  to  reduce  the  current  burden  caused  by 
classification issues and uncertainties. However the introduction of new measures may result in 
additional  costs  for  adapting  existing  systems  and  implementing  new  rules.  Since  there  was  no 
sufficient  and  reliable  data  to  calculate  the  burdens  in  monetary  terms,  any  quantification 
attempts were only possible on the basis of hypothetical scenarios.  

Option 1 would not impose new costs for all stakeholders beside the 'one off' need to familiarise 
with the new rules and guidelines, adopt standard procedures and train staff accordingly. As for 
businesses,  the  staff  efforts  required  to  familiarise  and  implement  the  new  rules  may  vary  by 
company  size.  The  affected  population  encompasses  in  principle  all  those  who  produce 
‘borderline’  CN  2206  products,  these  can  be  found  primarily  among  OFB  producers,  but  also 
among  certain  breweries  and  wine/liqueurs  producers.  The  Study  estimates 
the 
familiarisation costs would amount to approx. € 4,500 per company. These costs are likely to be 
supplemented  by  the  costs  potentially  incurred  to  review  the  production  processes,  economic 
portfolios or market strategies. The impact on competent authorities could not be quantified in the 
Study. However, in terms of unit costs it would be expected to be higher although – given that the 
affected population is limited - in aggregated terms it may be modest. The Study estimates  that 
the aggregated benefits would possibly offset costs within a 5 – 6 year period.   

that 

Indirectly, Option 1 may reduce the number of complex dossiers by ca. 50%. That would lead to 
an  estimated  costs  savings  may  amount  to  some  EUR  1  -  1.5  million  per  year,  for  competent 
authorities. Non-quantifiable benefits for businesses in the same proportion can be assumed.   

Option  2  is  less  oriented  toward  ‘difficult-to-classify’  products,  and  the  burden  due  to  the 
difficult  distinction  between  CN  2206  and  CN  2208  would  persist.  Moreover,  distinction  may 
create  new  ‘borderline’  products  which  could, in  the  worst case  scenario,  neutralise  benefits  of 
any  new  clearer  definitions.  It  can  therefore  be  reasonably  assumed  that  the  overall  present 
burden  would  not  change  significantly  (EUR  2  –  2.5  million).  Option  2  would  require  various 
administrative actions, including familiarisation with the new rules and guidelines (similar to the 
costs associated with  Option 1),  amendment of  legislation, updating the IT systems, training of 
staff,  updating  some  national  procedures  for  licensing  and  authorisations,  etc.  All  the  required 
action  would  be  ‘one-off’,  no  relevant  recurrent  cost  is  envisaged.  The  affected  population 
includes  primarily  OFB  producers  and  the  IT  adjustment  associated  with  changing  of  the  EPC 
systems are estimated to amount to approximately EUR 800 per economic operator (weighted by 
enterprise  size).  The  costs  of  this  option  would  be  offset  by  the  benefits  in  10  years  or  more, 
which  is  longer  than  option  1.  Also  in  this  case  the  impact  on  competent  authorities  cannot  be 
quantified but the overall costs are expected to be modest. 

Furthermore, there are some important considerations related to the choice of demarcation Line A 
or  B  for  Option  2.  The  demarcation  Line  A  would  require  the  adoption  at  EU  level  of  a 
harmonised definition of cider, perry and the other OFB that correspond to the original scope of 
this  category  and  match  as  much  as  possible  with  existing  national  criteria  for  these  products. 
This is far from being straightforward: national definition vary significantly, the industry calls for 
a  permissive  approach  e.g.  establishing  no  minimum  amount  of  fresh  juice,  no  limits  to  added 
sugar and water etc. – which is probably tantamount to shifting Line A to overlap with Line B; 
whereas  certain  consumers  organisations  consider  most  of  the  mass-market  products  not  to  be 
‘real’ cider. It is apparent that the Directive is not the appropriate vehicle for product definition, 
which should instead be developed as sectoral legislation.  

Analogically, the demarcation Line B would require the definition of what a mixed drink is and 
the relevant criteria to allow for such a categorisation. Also in this case various approaches exist 

43 

 
 
and an agreement should be reached among MS at the expert group level. The French definition 
seems more all-catching than other mixed drinks definitions in that it applies either to mixture of 
different  beverages  or  to  beverages  with  a  certain  amount  of  added  sugar/sweeteners.  In  this 
respect, it may encompass also various ‘mass-market’ ciders - that means Line B shifts leftward 
to nearly coincide with Line A.  

The  administrative  burden  of  Option  3.a  and  3.b  would  require  efforts  and  resources  in  all 
phases of their development and implementation cycle. There is no precise estimate of the overall 
cost, but Options 3.a and 3.b would be in line with the expected costs and benefits of Option 1. 
As  noted  above  Option  3.a  is  currently  underway.  The  development  of  a  sectoral  regulation 
(option 4.a) for cider, perry and other specific OFB without the corresponding amendment in the 
Directive would have no benefit from a tax perspective. As a complimentary measure, it would 
result in similar cost / benefit to that of Option 2.  

The costs of a new EPC (Option 4.b) include the update of the existing excise systems used by 
both  businesses and MS. The change envisaged is  minimal,  however  all IT  systems, templates, 
manuals etc. should be updated to include the new EPC. The administrative burden for authorities 
is possibly greater and involves the amendment of regulation and standard operating procedures, 
informing and training businesses at all levels, and obviously the direct costs of updating the IT 
systems.  The  unit  cost  per  MS  would  vary  in  accordance  with  the  specificities  of  the 
administrative  system  in  place  and  the  size  of  the  country,  but  interviewees  were  not  able  to 
provide a quantitative estimate.   

While there are costs associated with the introduction of a separate EPC for OFB, its introduction 
would bring significant added value in terms of monitoring and control of the market and excise 
duty trends. Currently tax authorities are seldom able to differentiate, and therefore to appreciate 
the  market  trends  of  OFB,  which  is  the  category  that  mostly  contains  new  and  ‘borderline’ 
products, so they have access to limited data evidence to support their tax policy decisions.  

In  the  event  of  further  changes  of  the  excise  duty  structure,  such  as  new  tax  categories  to 
differentiate among OFB, the revision of EPC would become necessary for a proper management 
and  monitoring  of  products  movements,  so  this  option  would  become  justified  also  in 
costs/benefit terms. The impacts of the various options are summarised in Annex 17. 

6.3.  Dysfunctional application of reduced rates 

6.3.1.  Option 1 – Improve the functioning of reduced rates for small breweries 

Competition and market effects 

As described in the baseline analysis, the small brewers market is growing at a very fast pace and 
most  likely  the  frequency  of  cross-border  trade  will  increase.  It  is  logical  to  presume  that,  left 
unfixed,  the  dysfunctional  application  of  the  reduced  rates  for  small  brewers  will  increase  and 
may lead to unfair competition in the single market.  

The clarification of the conditions at which a small brewer shall be considered independent will 
benefit the public authorities called to implement these provisions, as well as to small brewers. 
Indeed,  should  this  clarification  be  introduced,  it  would  be  easier  for  public  authorities  and 
businesses  to  determine  whether  certain  business  models  or  decisions  are  compatible  with  the 
reduced rate schemes. 

For  small  brewers,  this  would  reduce  the  risks  connected  to  the  entering  into  certain  trade 
relationships, as well as the litigation costs associated with cases where the interpretation of the 
customs  authorities  will  be  challenged  by  the  operator.  Also,  the  discrepancies  between  MS  or 

44 

 
 
between  regions  of  the  same  MS  –  which  have  been  sporadically  reported  –  will  be  tackled, 
reducing the risk of an uneven treatment of similar situations. 

An improvement in the legal clarity of the provision for cooperating breweries, and a smoothing 
of  the  procedures  for  intra-EU  trade  are  a  positive  factor  for  the  competitiveness  of  SMEs.  In 
particular, this would benefit larger players across the SME population, which are more likely to 
enter into cross-border trade or into more complex contractual relations, favouring their business 
growth.  At  the  same  time,  increased  ease  of  doing  business  for  intra-EU  traders  could  have  a 
positive  market effect for cross-border businesses, and eventually result in  an increase  of intra-
EU  trade  flows.  However,  the  scale  of  the  problem  at  stake  is  modest,  meaning  that  the 
procedures  to  apply  the  reduced  rates  do  not  represent  a  high  barrier  to  the  functioning  of  the 
single market. Hence, benefits are likely to be modest. 

Administrative burdens and enforcement costs 

Any clarification to how reduced rates should be applied to businesses established in a different 
country than that in which the beer is released for consumption would affect the administrative 
burdens borne by businesses and the enforcement costs borne by public authorities. 

Under  Option  1.b,  a  uniform  certificate  issued  by  customs  authorities  upon  request  to  any  EU 
brewer could serve as a means of proving the status of small brewer. Such a certificate could be 
designed  at  EU  level,  included  in  a  binding  norm,  and  would  be  accepted  by  all  customs 
authorities in the MS of destination. Such a certificate should provide information on the annual 
output and the independent status of the brewer.  

Under  this  approach,  companies  which  are  already  small  brewers  under  national  rules  would 
incur  limited  administrative  or  enforcement  costs  (i.e.  the  costs  of  requesting  the  certificate). 
Total burdens for the 675 operators in the sample MS would amount to approximately EUR 13 
000 or 2% of the burdens estimated for the overall scheme. The situation would be different for 
businesses who are not small businesses in their country. Therein, to claim the reduced rate, the 
brewer  would  need  to  prove  his/her  status  as  an  independent  economic operator,  by  submitting 
the  customs  authority 
information  on 
shareholding, company charter etc.). Administrative burdens for the 180 operators not under the 
scheme are estimated at EUR 32 000 or 5% of the burdens estimated for the overall reduced rates 
schemes. Overall, the additional administrative burdens seem limited for this policy option.    

the  required  documents  (company  registration, 

Enforcement  costs  for  public  authorities  are  considered  to  be  modest,  when  dealing  with 
businesses already benefitting from reduced rates in their country of establishment. There would 
be  some  further  administrative  burdens  for  businesses  and  enforcement  costs  for  public 
authorities as a legislative revision would be needed to introduce a uniform certificate, so that the 
format and content of the document could be fully harmonised at EU level.  The impacts of the 
various options are summarised in Annex 17. 

6.3.2.  Option 2 – Extending the reduced rates to small cider makers 

Competition and market effects  

In  terms  of  market  competition,  small  cider  makers  would  gain  relatively  to  large  ones,  either 
because they are able to reduce their price or increase their profit margins (or a combination of 
both).  The  reduction  compensate  for  higher  costs  of  production  due  to  diseconomies  of  scale, 
which  mirror  those  suffered  by  small  brewers.  The  sheer  difference  in  size  between  industrial 
producers and small cider makers, and the very small  market share retained by the latter imply 
that reduced rates would hardly represent a significant competitive threat for large players. 

45 

 
 
The competitiveness of SMEs in the cider industry would be enhanced by the provision. Impacts 
could be estimated to be analogous to those enjoyed by small breweries, given the similarities in 
terms of market structures. 

Administrative burdens and enforcement costs 

As far as administrative burdens are concerned, it is assumed that the annual burdens per small 
cider maker would be similar to those incurred by small brewers, estimated at EUR 178. The EU 
population potentially covered by the provision is estimated at about 1 145 small cider makers.27 
Total burdens are thus estimated at about EUR 200 000. Considering the market share of small 
cider makers in MS applying a positive tax rate, and thus potentially affected by the provision, 
costs per unit of production would amount to 0.32 EUR/hl. 

Finally, in terms of enforcement costs, public authorities would have to deal with a new scheme, 
and thus with the associated demands to obtain the reduced rates. This would engender additional 
costs, but the number of players at stake is so limited that those costs would not be large. Extra-
EU imports of cider represent 0.1% or less of EU consumption and only a share of that might be 
produced by small  cider  makers;  hence  no significant hurdle is  expected in  the management of 
possible applications from non-EU small suppliers. 

Tax revenues  

Forgone tax revenues are unevenly distributed due to the dimensions of the EU cider market. MS 
where the cider market is large and the excise duties are high, such as IE and the UK, the total 
forgone  tax  revenues  based  on  a  50%  reduced  rate  for  small  cider  makers  are  estimated  to  be 
EUR  1.3  million  and  9.7  million,  respectively.  Impacts  are  estimated  to  be  less  than  EUR  0.5 
million in MS such as PL and FR with small cider markets and low excise duties.  

Health impacts for consumers 

The effects on per capita alcohol consumption, and consequently health impacts, are expected to 
be negligible. The portion affected by the extension, estimated at 4.6% of the cider market, is too 
small  to  affect  the  overall  price  and  consumption  of  cider.  In  addition,  cider  represents  a 
relatively  smaller  market  compared  to  other  alcoholic  beverages  in  most  of  the  MS.  Only 
countries  with  a  very  large  cider  market,  the  UK  and  IE,  could  see  noticeable  negative  health 
effects, if the reduction was introduced. The impacts are summarised in Annex 17. 

6.3.3.  Option 3 – revised threshold for low strength beer 

This option is expected to generate impacts in terms of: (i) tax revenues, as larger shares of the 
market could benefit from reduced  rates compared to  the baseline;  (ii)  market effects,  as  lower 
taxation  may  lead  to  lower  price  for  low-strength  beer,  hence  an  increase  in  demand;  and  (iii) 
ambivalent public health effects, as increased consumption of low-strength beer may (or may not) 
reduce  the  per  capita  intake  of  pure  alcohol  and,  through  higher  availability,  may  increase  the 
number  of  alcohol  consumers,  particularly  among  price  sensitive  consumers  such  as  young 
people, heavy drinkers and people from lower socioeconomic groups.  

27   Based on the estimated number of small producers in the 5 MS and their share of consumption over total EU consumption 

46 

 
 
                                                 
Competition and market effects 

It is apparent that the market share for low-strength beer between 2.8% vol and 3.5% vol across 
all MS is modest; nonetheless, it is reasonable to assume that the adoption of the 3.5% threshold 
would develop a new ‘niche’ market immediately below this limit.  

Tax revenues  

The total foregone tax revenues (including VAT paid on excise duty) are expected to amount to 
less than 1% of the total tax revenue from consumption of beer in the selected MS. Foregone tax 
revenues might be even lower, if one considers that the new market for low-strength beer could 
partially flourish on top rather than at the expenses of the market for standard beer.  

Health impacts for consumers 

Considering  the  above  analysis  of  market  effects,  and  more  specifically  the  possible  limited 
increase  in  per  capita  consumption  of  low-strength  beer  (from  0.02L  to  0.10L  per  year),  any 
public health impact, either positive (where the additional consumption of low-alcohol beer is ‘at 
the  expense’  of  standard  beer  and  other  stronger  alcoholic  beverages)  or  negative  (where  low-
strength beer substitutes soft drinks, or increase the overall consumption of alcoholic beverages 
and facilitates the drinking initiation of young people), can be considered negligible. The impacts 
are summarised in Annex 17. 

6.4.  Unclear provisions to measure of Plato degree for sweetened / flavoured beer 

As discussed above, all options and sub-options (except the baseline) revolve around the selection 
of one of the three existing approaches to measuring Plato degree and, therefore, they would have 
the same type but not magnitude of impact. The analysis presented here is based on the sample of 
6 countries selected for the case studies under the Study (AT, BE, DE, IT, PL and RO).  These 
countries represent the large majority of the sweetened/flavoured beer market in the EU countries 
that have adopted the ‘Plato’ method.  

Tax revenues and market effects 

As described in the baseline analysis, the EU market for sweetened/flavoured beer is expected to 
grow fast in the coming decade and most likely the frequency of cross-border trade will increase. 
Whereas  precise  estimates  are  not  available,  it  is  logical  to  presume  that  unfixed,  the  problem 
may  lead  to  unfair  competition  in  the  domestic  and  single  markets  if  alcoholic  strength  is 
calculated based on different methods.  

It should be noted that the present appreciation of impacts on tax revenues and market effects has 
a  domestic  market  angle.  Impacts  are  country-specific  and  depend  not  only  on  the  approach 
applied to measure Plato degree of sweetened/flavoured beer, but also aspects such as the level of 
excise duty, VAT and market segments.  

Selecting approach A or B1 would result in an overall reduction in tax revenues (excise duty and 
VAT on excise duty) from sweetened/flavoured beer of more than EUR 30 million (about -25%), 
compared  to  the  baseline  situation.  Consumption,  on  the  other  hand,  might  increase  by 
approximately 100 000 hl in the 6 countries combined, i.e. less than 2% of the total consumption 
of sweetened/flavoured beer. Limited changes in consumption reflect limited changes in prices. 
Selecting approach B2 would result in minor changes as opposed to the baseline approach as this 
is  the  approach  currently  in  force  in  most  of  MS  considered.  Expressing  the  changes  as  a 
percentage  of  the  total  beer  market,  the  impacts  become  rather  negligible:  between  +0.2% 
(moving to approach B2) to -1% (selecting approach A or B1) for tax revenues (including VAT 
on excise duty), and between almost nil (selecting approach B2) to +0.1% (selecting approach A 
or B1) for consumption volume.  

47 

 
 
Different MS will have different baseline scenarios, depending on which method they currently 
use and to which method they would need to switch (see Annex 14). As approach B2 generates 
the highest excise revenues, countries that will need to change away from this method are likely 
to experience some revenue decrease (as it is confirmed by the analysis of DE, AT and to a lesser 
extent PL and BE). Countries currently using another method than B2 would see a sharp increase 
in the excise revenues, for example in RO.  

Analogous patterns are also observable for the price and consumption changes. Countries which 
would decrease their excisable tax base (discarding approach B2) should expect a drop in price 
for sweetened/flavoured followed by corresponding increased consumption. In countries like RO, 
this effect would be reversed.  

While approaches A and B1 lead to similar value of the Plato degree of sweetened/flavoured beer 
and  somehow  reflect  its  actual  alcohol  strength,  approach  B2  leads  to  higher  Plato  degree, 
possibly  greater  than  the  Plato  degree  of  a  standard  beer  with  an  equivalent  alcoholic  strength. 
For  instance,  approach  B2  results  in  almost  double  the  Plato  degree  of  a  typical  radler  when 
compared to approach A or B1. 

In principle, approach B2 is therefore more prone to generate possible distortion of competition 
between  standard  and  sweetened/flavoured  beer.  However,  as  the  impact  analysis  showed,  the 
actual changes in price level that can be expected from switching between different approaches 
are rather modest, and of limited importance vis-à-vis other competitiveness factors. Overall there 
is a negligible risk of an excessive market distortion caused by the selection of any of approaches. 

Public health  

Any significant impacts potentially stemming from the harmonised adoption of any of the three 
approaches considered appear to be unlikely or limited. In fact, based on Eurostat date for total 
population  above  15  years,  the  annual  average  per  capita  consumption  of  sweetened/flavoured 
beer in the six surveyed MS would range from 2.67 litres per annum (selecting approach B2) to 
2.73  litres  per  annum  (selecting  approach  A  or  B1).  The  difference  is  clearly  negligible  when 
compared to average per capita consumption of ‘traditional’ beer, which in sample MS exceeds 
78 litres per annum. 

Enforcement and legal costs 

When  it  comes  to  enforcement,  any  change  in  current  approaches  would  require  some  MS  to 
adapt their monitoring and control procedures. As mentioned, approach B2 is the most used, so 
the overall number of countries that would have to modify their systems would be limited when 
approach B2 is defined as most appropriate. Moreover, approach B2 allows authorities to perform 
checks  directly  on  the  end-products,  with  no  need  for  on-site  inspections  and/or  measurement 
during  the  production  process,  and  is  therefore  considered  more  cost-effective  than  the  other 
approaches.  For  these  reasons,  the  selection  of  approach  B2  at  EU-level  would  have  little  or 
neutral effect on the enforcement costs for MS authorities. 

Conversely,  the  customs  authorities  interviewed  explained  that,  as  things  now  stand,  it  is  not 
possible to compute the parameters required to apply approach A or B1 by analysing the bottled 
‘end-product’,  since  the  current  analytical  methods  do  not  allow  for  it.  Therefore,  the 
enforcement of approaches A and B1 would require checks at the production facilities, and these 
may generate new one-off costs, such as the devising of operational rules and the installation of 
measurement  equipment,  as  well  as  recurring  costs  in  the  form  of  on-site  inspections.  An 
additional  issue  concerns  sweetened/flavoured  beer  produced  in  another  MS  or  third  country, 
since the authority of  the MS where  the product is  released for consumption could not  directly 
conduct inspections and would be reliant on the information provided by the businesses and/or, in 
certain circumstances, by the authority of the producing country. 

48 

 
 
the  selection  of  a  harmonised  approach 

the  Plato  degree  of 
Finally, 
sweetened/flavoured  beer  would  increase  legal  certainty  and  eventually  reduce  the  risk  of 
disputes between tax authorities and brewers. All impacts are summarised in Annex 17.  

to  measure 

7.  HOW DO THE OPTIONS COMPARE? 

As regularly recalled, the issues at stake in the present initiative are relatively independent from 
one  another.  Therefore,  the  comparison  of  options  has  been  performed  for  each  thematic  area 
separately,  rather  than  in  a  cumulative  way.  For  the  sake  of  transparency  and  clarity,  all 
objectives are considered in the analysis of effectiveness even though some of the options were 
never designed to meet them. However, care was taken to ensure that all of the options are at least 
neutral (no impact) towards any of the objective.  

This  is  reflected  in  the  comparison  table  at  the  end  of  this  section,  while  the  narrative  of  the 
analysis focuses only on the objectives and impacts relevant to the particular policy option.  

7.1.  Dysfunctions in the application of exemptions for denatured alcohol 

7.1.1.  Comparison of options 

Mutual recognition of CDA 

A  regulatory  amendment  (Option  1)  of  the  Directive  will  ensure  that  divergent  interpretations 
involving  MS  that  have  notified  CDA  formulations  other  than  the  Eurodenaturant  will  be 
eliminated and legal certainty will be achieved.  

This option is in line with the approach with most MS and as a result it will have little impact on 
tax  revenues  of  MS  and  it  will  not  increase  costs  for  businesses.  For  the  main  this  option  is 
codifying  the  existing  practice.  This  option  will  reduce  any  remaining  trade  barriers  and 
distortions and consolidates MS desires for a harmonised solution for CDA into a legal text.  

PDA formulations 

Effectiveness 

The extent to which Option 2 or Option 3 would effectively meet the policy objective of legal 
certainty  is  limited.  Option  2  would  increase  the  transparency  and  certainty  surrounding  PDA 
formulations, however there is no guarantee that legal certainty would be achieved. While the list 
would be agreed by all MS, MS would retain flexibility to authorise other formulations in cases 
where  the  fiscal  risk  is  demonstrably  low.  This  concept  of  low  fiscal  risk  currently  varies 
significantly  between  MS  and  the  possibility  to  authorise  other  formulations  limits  the 
transparency.  

Option  3  is  effectively  a  complimentary  measure  and  would  be  ineffective  in  creating  legal 
certainty. Option 4 would enhance the clarity surrounding the legal meaning and uses of PDA. 
This would eliminate ambiguity and uncertainty that currently exists in relation to PDA.   

Efficiency 

Option  2  would  result  in  fairer  competition  between  businesses  in  different  MS,  however  the 
costs  for  MS  and  the  Commission  would  be  significant.  These  costs  would  be  balanced  by  the 
savings / benefits of a harmonised lists, which would reduce the workloads of custom laboratories 
and  the  risks  associated  with  cross-border  trade  that  currently  exist  for  businesses.  The 
confidence / capacity building measures of Option 3 would be efficient in terms of increasing the 
trust between MS, however as an independent option, the overall efficiency is highly uncertain.  

49 

 
 
Option  4  would  be  efficient  as  the  costs  of  clarifying  the  legal  base  for  PDA  would  result  in 
benefits  for  businesses  in  terms  of  legal  certainty.  This  would  ensure  equal  treatment  of  goods 
containing  PDA  across  the  EU  and  reduce  the  risk  of  costs  associated  with  disputes  between 
businesses and national authorities. 

Coherence 

As noted above Option 2 and 4 would result in improving the functioning of the single market. 
Option 3 may assist in increasing information flows between MS, however the overall coherence 
with other EU policy objectives is highly uncertain. 

7.1.2.  Stakeholders views 

Mutual recognition of CDA 

Most stakeholders interviewed as part of the Study, as well as a small majority of respondents to 
the OPC, were in favour of the harmonisation of CDA formulations. However there was strong 
opposition from a limited number of MS. The response to the OPC attracted a low response level 
and for the main a neutral response was adopted. In the case of continued uncertainty regarding 
the mutual recognition of CDA, 41% (38 respondents) agreed that the continued use of national 
formulations causes legal uncertainty, with only 7% disagreeing.  

PDA formulations 

The  development  of  a  harmonised  list  for  PDA  was  strongly  opposed  (73%)  by  industry 
stakeholders with an interest in the production or end use of industrial alcohol. Overall a small 
majority (51%) of respondents to the OPC disagreed with this option.  

The industry also expressed a strong disagreement with a strict interpretation of the legal base for 
PDA  formulations.  Instead  respondents  (85%)  supported  capacity  and  confidence  building 
measures in order to improve the understanding of MS' approaches. 

7.1.3.  Comparison summary and preferred option/package of options 

Option 

EFFECTIVENESS 

1 - CDA 

2 – PDA 
list 

3 – 
capacity 
building 

4 –PDA 
terms 

No 
change 

any 

and 

and 

clear 

correcting 

ensuring  fair  treatment  of  businesses 
across all alcohol sectors 
preventing 
distortions of competition  
providing  clear  rules  on  the  scope, 
classification and calculation of duties 
for businesses and MS 
providing 
efficient 
conditions  to  determine  denaturation 
procedures 
reducing  administrative  burden  and 
compliance  costs  for  businesses  and 
tax authorities  
provide legal certainty 
strengthening  the  fight  against  fraud 
and tax evasion 
improving human health protection 
EFFICIENCY 
administrative burden 
tax revenues 

++ 

++ 

++ 

++ 

0 

++ 

+ 

0 

0 
0 

+ 

+ 

+ 

+ 

0 

0 

+ 

0 

0 
0 

50 

0 

0 

0 

0 

- 

0 

+ 

0 

- 
0 

++ 

++ 

++ 

++ 

+ 

++ 

++ 

+ 

+ 
0 

0 

0 

0 

0 

0 

0 

0 

0 

0 
0 

 
 
 
 
 
 
 
COHERENCE 

OVERALL 
STAKEHOLDERS OPINION 

++ 
++ 
+ 

+ 
0 
- 

0 
0 
++ 

+ 
++ 
- 

0 

In terms of CDA, Option 1 of amending the Directive to clarify the mutual recognition of CDA 
(hybrid recognition) is the only and the preferred option to ensure legal certainty within this area. 
For  the  record,  alternative  modalities  of  improving  the  mutual  recognition  were  analysed  and 
discarded early on in the process.  

The preferred option in terms of PDA is Option 4 to clarify the unclear wording of the Directive 
to  increase  the  legal  certainty  for  its  indirect  uses  and  finished  product  containing  PDA.  The 
capacity  /  confidence  building  measures  under  Option  3  is  also  an  option  that  is  worthwhile, 
however  this  option  will  be  complimentary  as  its  success  as  a  standalone  approach  would  be 
mininal. 

The  package  of  options  under  the  cluster  of  measure  relating  to  the  treatment  of  denatured 
alcohol is therefore composed of the bundle of Option 1 + Option 4 accompanied by Option 3, 
on a complementary basis.  

7.2.  Dysfunctions in the classification of certain alcoholic beverages 

7.2.1.  Comparison of options 

Effectiveness 

In  terms  of  legal  costs,  the  overarching  rationale  for  all  options  is  to  reduce  legal  uncertainties 
and  disparities  of  interpretations  of  certain  products.  The  effectiveness  of  the  various  options 
appears uneven with not one option achieving this without negative impacts. 

Option 1 would reduce the disparities of tax treatment of similar products as the classification for 
excise  purposes  would  not  be  so  strictly  determined  by  CN  codes.  Instead  the  classification 
would also be linked to the CJEU rulings in this area. This option alone, as it was flagged out by 
stakeholders (especially in tax administrations), would not bring the desired effects as the current 
uncertainties  in  the  underlying  CN  classification  would  persist.  Due  to  the  subjective  nature  of 
the  CN  explanatory  note  and  the  CJEU  principles  leaving  ample  room  for  interpretation,  there 
would  be  a  need  for  robust  guidelines  on  the  conditions,  criteria  and  methods  to  treat  the 
borderlines products (offered by options under  cluster  3).  For  the internal  market to correct the 
discrepancy, it would be most effective across the EU if customs classifications also took account 
of the CJEU criteria, which is currently underway (Option 1 + Option 3.a/3.b). 

The  final  element  of  Option  1  which  involves  clarifying  the  term  'entirely  fermented  origin'  in 
relation to AFC would remove the degree of uncertainty that the current ‘patchwork’ of national 
solutions  inevitably  cause,  which  may  create  unnecessary  hurdles  and  delays  in  operations  and 
eventually constrain the full deployment of the market potential.  

Options  2.a  and  2.b  would  result  in  legal  certainty  at  EU  level  and  a  consistent  treatment  of 
borderline  products  across  MS  since  it  would  make  the  current  national  level  non-harmonised 
distinctions  unnecessary.  As  with  Option  1,  Options  2.a  and  2.b  would  be  most  effective  if 
accompanied  by  robust  definition  for  the  new  category,  with  available  guidance  on  conditions 
and  criteria  allowing  classification  under  that  or  another  tax  code  (Option  2.a/2.b  +  Option 
3.a/3.b).  At  the  same  time,  implementing  new  tax  category  would  necessarily  impose  an 
administrative  cost  and  burden  on  businesses  and  tax  authorities  as  they  would  need  to  review 

51 

 
 
 
 
 
 
 
 
 
 
 
their existing national excise duty systems from a legal and technical perspective, which is further 
analysed under efficiency. 

Under approach 2.b (demarcation line at borderline products of mixed drinks), in order to avoid   
competitive distortions, the structure (and level) of taxation would most likely be in line with that 
applicable to ethyl alcohol. It would however increase the complexity of the excise law and create 
incongruity  for  the  EMCS,  which  does  not  distinguish  between  OFBs  (traditionally  closer  to 
wine)  and  wine.  Resolving  the  EMCS  would  not  only  be  costly  but  also  undesirable  as  the 
original  intention  of  the  OFB  category  was  to  protect  other  traditional  products  of  fermented 
origin – for example cider and perry - from higher taxation. For these reasons, in order to avoid 
instituting  differences  in  the  tax  category  which  may  unintentionally  exclude  some  eligible 
products, erode this tax category in legal terms and increase the overall complexity of the system, 
the  preferred  approach  is  the  approach  2.a  distinguishing  for  tax  purposes  traditional  cider  and 
perry from all other OFB.  

This will enable MS to introduce such differentiation into the OFB tax category and enable them 
to apply different excise rates to these products if so desired. Furthermore this differentiation will 
ensure the application of reduced rates (see section 5.4.3) is restricted to (small) cider and perry 
makers.  Put  differently,  it  is  considered  more  effective  to  increase  legal  certainty  to  sub-define 
the OFB products that lend themselves to more distinct definition without deeper fragmentation 
of this tax category.  

Options  3.a  and  3.b  –  although  viable  on  their  own  –  would  alone  yield  equally  uncertain 
benefits albeit for different reasons. As for Option 3.a, its strength lies in mitigating the negative 
results of the current CN code uncertainties which would thus not be replicated to the excise duty 
level, and the risk of more severe legal disputes may be avoided. Revision of the CNEN towards 
closer  correspondence  in  the  interpretation  of  the  CJEU  principles  in  both  excise  and  customs 
classification, would therefore eliminate the very source of disparities, being thus very effective. 
Option  3.b,  consisting  of  non-binding  guidelines,  would  necessarily  leave  a  certain  room  of 
interpretation to MS authorities. Therefore, this sub-option would be comparatively less effective 
in ensuring a harmonised treatment of the same products across different MS. The BTIs would no 
longer constrain the tax categorisation and their use would likely reduce, but the absence of this 
practical instrument may eventually trigger the perception of a higher degree of uncertainty and 
unpredictability  by  businesses.  Moreover,  the  risk  of  non-robust  definitions  or  non-compliance 
(given  the  non-mandatory  nature  of  the  guidelines)  may  constrain  the  effectiveness.  If  the  tax 
categorisation  remains  determined  by  the  unchanged  CN  codes,  non-harmonised  national 
measures for special products may persist or even accelerate.  

Depending on the scope of Option 3.a and 3.b, it could be argued that at best, they could together 
pre-empt the need to amend the Directive and would also result in sufficient legal certainty at EU 
level. However, as these options are outside the Directive, this would require the involvement and 
consensus of several different services of the national and European administrations, which will 
naturally impact negatively the efficiency of its implementation.  

Option 4.a involves the adoption of a sectoral definition, which would assist when categorising 
OFB  within  the  Directive,  however  as  a  standalone  option,  it  would  not  address  the  current 
problem of different classifications of alcoholic products. An amendment to the Directive would 
still be necessary.  

Option 4.b would enable tax authorities to  enhance  the data they currently receive through  the 
existing excise systems. This would improve their tax policy decisions.   

52 

 
 
Efficiency 

Option  1  would  transpose  the  CJEU  rulings  into  the  Directive  and  would  impose  'one  off' 
minimal  costs  and  burdens  on  businesses  and  national  administrations.  Due  to  the  subjective 
nature  of  the  CJEU  criteria,  the  overall  efficiency  of  this  option  is  questionable,  as  variances 
between MS will persist and disputes may continue. 

As  briefly  mentioned  under  the  effectiveness  criterion,  implementation  of  Option  2.a  and  2.b 
would  trigger  adjustment  costs  and  burdens  to  businesses  and  national  administrations  alike, 
stemming  from  separating  the  category  into  cider/perry  from  other  OFB.  This  is  because  there 
seems to be (i) relevant disparities in the legal definitions that already exist in the different MS, 
which should be aligned; and (ii) diverging views between producers of ‘mass-market’ products 
and  their  trade  associations,  and  small  ‘traditional’  producers  and  certain  consumers’ 
organisations.  

Furthermore,  with  some  exceptions  (e.g.  IE,  UK)  these  products  are  typically  regulated  in 
national  food  and  agriculture  legislation,  so  the  Directive  does  not  seem  to  be  the  most 
appropriate vehicle for establishing a common product definition. At the same time, there might 
be  some  rationale  to  pursue  an  EU-level  definition  of  cider  etc.  outside  of  its  fiscal  treatment. 
Cider has historically never been clearly defined in its own right - it follows (along with OFB) the 
rules on rates for wine. As the cider industry has developed, there has become a need for a more 
efficient structures regime to define cider (& perry, fruit wines and mead) separately within the 
category of OFB especially mixed products. 

In the case of mixed products, the main challenge would consist in adopting a definition that does 
not simply create tax incentives to develop substitute products, as it happened for instance with 
the  ‘alcopop’  tax  in  Germany.  On  the  scope  of  this  category,  MS  may  have  different  views 
related to the specificities of the national industry and market and might want to include or not 
malt-based mixed beverages and so called ‘wine-coolers’.  

Option  2.a  would  be  more  efficient  and  easier  to  implement  than  option  2.b.  Adopting  a 
definition  for  alcopops  runs  the  risk  of  creating  a  new  tax  incentive  to  develop  substitute 
products. This would result in further amendments to take account of future developments. Cider 
and perry are traditional products and the basis of their production remains  the  fermentation  of 
apples and pears.  

Implementation  of  Options  3.a  and  3.b,  as  they  fall  outside  of  the  remit  of  the  excise  duty 
system, would require a larger consensus at the international level, in order to avoid any hurdles 
and uncertainty affecting the international trade. Option 3.a is currently underway and expected 
to be completed by June 2018 and will complement the final option chosen.    

Both options may result in reductions in demand for borderline products, which would negatively 
impact tax revenues of MS and the changes analysed would likely not lead to beneficial effects. 
Furthermore,  the  only  benefits  would  come  from  products  that  would  be  unintendedly  affected 
(e.g. AWP). There is some reasoned expectation that consumers' preferences would largely shift 
to other alcoholic beverages, so the net tax loss would be mitigated. Overall however, a minor tax 
loss can be expected, since the main alternatives to borderline products are more lightly taxed.  

All options would have the recurring benefit of a reduction of administrative burden and would 
involve  one  off  costs.  As  a  result  the  balance  of  costs  and  benefits  would  shift  over  time.  The 
costs of Option 1 would be offset within 5 – 6 years, whereas Option 2 would take longer (10 
years or more). Options 3.a and 3.b require more effort and resources of more stakeholders and 
therefore  it  is  difficult  to  estimate  the  balance  of  costs  and  benefits  of  these  options  beyond  a 
reasoned assumption that their implementation could be significantly hampered.  

53 

 
 
Coherence 

All  policy  options have  competition  and  market  effects.  Option  1  would  negatively  impact  the 
demand for borderline products and may impact non target products unintentionally. Furthermore 
in the absence of robust criteria this could have a severe impact on trade as the BTI tool would no 
longer ensure the same tax treatment of a product across the EU (including imported products). 
Option  2  would  increase  harmonisation  across  the  EU  market  but  like  option  1  may 
unintentionally  impact  non  target  products.  Option  3  would  be  effective  as  the  uncertainties 
relate to customs classification and the differentiation of EPC and these options would improve 
the functioning of the internal market.  

All  options  may  be  seen  through  the  eyes  of  stakeholders  as  incoherent  in  terms  of 
correspondence with the present national legislation or practice. Defining a product definition or 
providing  guidance  on  classification  will  inevitably  impact  some  countries  more  than  others, 
depending  on  which  approaches  and  definitions  are  chosen.  However,  given  that  the  lack  of 
coherence in applying tax and customs treatment to the products broadly classified under OFB is 
the very problem at stake behind the present initiative, the coherence aspects should be seen from 
the  perspective  of  the  single  market.  In  that  case  all  options  are  coherent  with  the  objective  of 
ensuring smooth functioning of the internal market and ensuring coherence of product treatment 
in  each  geographical  market.  The  difference  will  lie  in  the  effectiveness  and  efficiency  with 
which  this  sought  for  coherence  will  be  achieved,  which  distinction  is  duly  analysed  under  the 
two other respective comparison criteria.  

All  options  are  also  broadly  coherent  with  the  Council  conclusions  calling  for  the  necessity  to 
prevent  ambiguities  leading  to  distortions  of  competition  between  businesses  and  to  apply 
harmonised  conditions  and  rules  for  taxing  alcohol  and  alcoholic  beverages.  The  Council 
specifically  recognised  the  need  to  clarify  and  to  harmonise  further  the  classification  rules  for 
products manufactured as mixtures of different categories of alcoholic beverages or as mixtures 
with non-alcoholic beverages or OFB in order to unify the treatment for excise purposes of the 
same products across the MS, and so ensure legal certainty and clarity for businesses.  

Option 1 would be coherent with the CJEU rulings and is likely to be less disruptive to MS as 
this is the current criteria used by MS to classify these products. However the current work on the 
CN codes (Option 3.a) would also need to be incorporated into Option 1 to ensure consistency 
of  approach.  Defining  cider,  perry  and  fruit  wines  (Option  2.a)  would  be  in  line  with  other 
alcoholic beverages such as wine and spirits, which have sectoral definitions. Aligning a sectoral 
definition with a new category for traditional OFB would ensure coherent across EU legislation 
(option 4.a).   

7.2.2.  Stakeholders views 

The level of agreement between the OPC respondents is mixed and can be easily related to the 
perspective  of  specific  segments  of  the  industry  and  /  or  interest  of  other  nature.  Respondents 
often  conceded  that  there  can  be  added  value  in  a  general  clarification  of  the  current  situation, 
however  they  believe  that  the  perceived  risks  of  a  legislative  change  tend  to  outweigh  the 
perceived benefits across all respondent groups with the exception of private individuals. A clear 
majority of industry respondents believe that a revision of the OFB tax category would generate 
negative  effects  on  all  fronts,  including  adverse  effects  on  international  trade,  classification 
uncertainties and disputes and market distortions.  

Almost  half  of  respondents  (48%)  agree  that  beverages  like  cider  and  perry  should  be  defined 
separately and not under the generic OFB label (24% disagreed with the option). This increases to 
53% of stakeholders with an interest in the cider sector with the remainder neutral and to 68% of 
private individuals.  

54 

 
 
In terms of the approach to the classification of certain alcoholic beverages, 68% of respondents 
agreed,  if  not  strongly  agreed  with  incorporating  relevant  parts  of  CJEU  judgements  into  the 
Directive.  The  option  of  creating  a  new  category  for  cider,  perry  and  fruit  wine  was  positively 
received by the beer and cider industries (56% and 64% respectively) but only 35% and 38% of 
wine  and  spirits  producers  agreed  with  this  option.  However  private  individuals  strongly 
supported the new category with 69% in favour of this option.  

73% of respondents to the OPC would like the meaning of the concept of 'entirely of fermented 
origin'  clarified  so  as  to  define  the  status  of  products  containing  AFC,  with  only  the  spirits 
industry expressing a more cautious opinion. A mixed response was received in relation to non-
regulatory options.     

41% of respondents to the OPC supported the amendment to the EPC to separate OFB from wine. 
A further 29% expressed a neutral position, while 30% of respondents disagreed. 

7.2.3.  Comparison summary and preferred option/package of options 

Option 

EFFECTIVENESS 

1 – 
CJEU 
rulings 

2a– new 
sub 
category 
for 
cider/ 
perry 

2b– new 
sub 
category 
for other 
mixed 
drinks 

3a – CN 
EN  

3b – non 
binding 
guideline
s 

4a – 
sectoral 
definitio
n 

4b - EPC  No 

change* 

of 

fair 

duties 

classification 

ensuring 
treatment  of 
businesses  across  all  alcohol 
sectors 
preventing  and  correcting  any 
distortions of competition  
providing  clear  rules  on  the 
and 
scope, 
calculation 
for 
businesses and MS 
providing  clear  and  efficient 
determine 
to 
conditions 
denaturation procedures 
reducing  administrative  burden 
and 
for 
businesses and tax authorities  
provide legal certainty 
strengthening the fight against 
fraud and tax evasion 
human 
improving 
protection 
EFFICIENCY 
administrative burden 
tax revenues 
COHERENCE 

compliance 

health 

costs 

OVERALL 
STAKEHOLDERS 
OPINION 

- 

- 

- 

0 

- 

0 
0 

+ 
0 

++ 

++ 

+ 

+ 

- 

++ 

- 
- 

+ 
++ 

+ 

+ 

+ 

- 

- - 

+ 

- - 
- 

+ 
+ 

0 

- 

0 

- 

0 

0 

0 
- 

++ 
0 

0 

n/a 

n/a 

n/a 

- 

- 

- 

+ 

0 

+ 
- 

++ 
0 

0 

- 

- 

- 

0 

0 

0 
- 

+ 
0 

+ 

0 

0 

0 

- 

0 

- 
0 

+ 
0 

+ 

0 

0 

0 

0 

0 

0 
0 

0 

The preferred option whose deployment would be crucial to achieve the objectives is Option 2.a 
splitting  the  OFB  category  into  two  subcategories  of  which  one  would  maintain  the  current 
treatment, while the other would ideally comprise of all traditional OFB products (i.e. cider and 
perry  etc.)  which  would  be  defined  and  treated  separately.  While  this  option  has  downsides, 
including increased burden on businesses and tax authorities, this is the preferred option as this 

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
would  reduce  the  disparities  of  treatment  of  similar  products  and  would  ensure  the  effective 
operation of the reduced rates for small cider makers (if introduced). 

Work  is  currently  underway  in  improving  the  CN  explanatory  notes  (Option  3.a),  which  as  a 
complimentary option would assist in reducing classification disparities. Therefore, this approach 
alongside  the  non  binding  guidelines  under  Option  3.b  could  also  form  part  of  the  preferred 
option  package  as  they  can  improve  the  overall  effectiveness  of  the  functioning  of  the  OFB 
category  through  providing  operational  definitions,  criteria  and  methods,  irrespective  of  what 
changes  to  this  category  will  have  been  made.  In  other  words,  Options  under  cluster  3  would 
work just as well with Option  1 as with  Option 2 or  independently (albeit  less effectively)  and 
there is no reason to not include them in the preferred package. Options under cluster 4 could also 
form part of the preferred package going forward. Also these are complimentary options which 
would improve the functioning of Option 2.     

The  package  of  options  under  the  cluster  of  measure  relating  to  the  classification  issus  is 
therefore  composed  of  the  main  Option  2.a  accompanied  by  Option  3.a  /Option  3.b/Option 
4.a/Option 4.b on a complementary basis.  

7.3.  Dysfunctional application of reduced rates 

As the problems related to the application of reduced rates are multifaceted and independent from 
one another, the options are compared in sub-clusters related to the specific problems, following 
as well the logic of the presentation of impacts earlier on. 

7.3.1.  Comparison of options 

Options under cluster 1: Improve the functioning of reduced rates for small breweries 

Effectiveness 

In terms of legal costs, the overarching rationale for both options and sub-options is to reduce the 
legal uncertainties and disparities of interpretations of 'legally and economically independent' and 
to improve the cross-border functioning of the scheme. The choice of the means to introduce this 
policy  option  –  hard  versus  soft  law  –  would  have  impacts  over  the  level  of  legal  certainty 
achieved. 

Option  1.a.1  would  involve  a  regulatory  amendment  of  the  Directive,  which  will  ensure  the 
policy  objective  of  legal  certainty  is  achieved.  However  due  to  the  fast  changing  industry,  this 
may result in a definition becoming obsolete with new developments. Option 1.a.2 would allow 
for  a  degree  of  subjectivity,  which  could  quickly  address  any  new  market  developments.  This 
would enable MS to resolve any new issues without resorting to binding legislation, based on the 
consensus  of  national  authorities.  However  MS  would  retain  the  power  to  apply  it  or  not.  The 
creation  of  an  uniform  certificate  (option  1.b)  for  recognising  small  brewers  would  be  a 
regulatory amendment and therefore ensuring legal certainty for businesses.  

Efficiency 

Currently  the  reduced  rates  for  small  brewers  works  well  for  the  main  and  does  not  generate 
unnecessary  administrative  burdens  or  enforcement  costs.  The  clarification  of  the  term  'legally 
and  economically  independent'  would  not  result  in  any  increased  costs  for  the  various 
stakeholders but would improve the overall efficiency of the relief.  

The verification of small brewers would have some administrative burdens or enforcement costs 
for ecomomic operators or public authoritites. The development of a certificate would result in a 
small  increase  in  administrative  burdens  for  ecomomic  operators  (estimated  at  7.5%  of  total 

56 

 
 
 
burdens from the scheme). Public authorities would incur modest additional costs, which would 
be higher for an uniform certificate. 

Coherence 

All options would improve the domestic and cross-border functioning of the small brewers relief. 
The increased legal clarity of the regulatory options would increase the ease of doing business for 
cross-border  businesses  and  ultimately  improved  their  competitiveness.  The  impact  of  the  non 
binding  options  are  similar  to  the  regulatory  options  but  the  magnitude  of  their  effects  may  be 
lower if MS chose not to implement the guidelines.  

Option 2: Extending the reduced rates to small cider makers 

Effectiveness 

The aim of the existing reduced rates scheme for small brewers is to support the competitiveness 
of  SMEs  vis  à  vis  large  players.  The  extension  of  this  scheme  to  small  cider  makers  would 
enhanced  the  competitiveness  of  these  producers  with  limited  adverse  effects  in  terms  of 
foregone revenues and administrative burdens. 

Efficiency 

This  option  would  impact  tax  revenues  for  public  authorities,  however  on  the  whole  these 
impacts are negligible with modest impacts in the traditional cider MS of UK and IE. Small cider 
makers would gain relatively to large producers but market effects are estimated to remain small, 
given the limited amount of sales covered by the reduction.  

In  terms  of  costs  for  businesses,  these  would  be  similar  to  that  of  small  brewers,  which  are 
negligible  at  EUR  0.32/hl.  From  an  enforcement  perspective,  due to  the  numbers  of  businesses 
involved,  the  amount  of  excise  revenues  involved  and  the  marginal  role  of  cross-border  trade 
there would be no significant requirement for additional resources. 

Coherence 

The public health effects of the reduced rates would be limited with only noticeable impacts in 
the traditional cider MS, such as IE and the UK.  

Option 3: Increasing the threshold for low strength alcohol  

Effectiveness 

Low strength alcohol provisions are largely unused due to the low threshold which is irrelevant 
for  most  of  the  beer  market,  with  the  exception  of  radler  and  a  few  other  beers.  The  brewing 
industry has reacted to the health conscious consumer and is developing more low strength beers. 
It is more costly to brew low strength beers and this relief would support the competitiveness of 
these  products  with  limited  adverse  effects  in  terms  of  foregone  revenues  and  administrative 
burdens.   

Efficiency 

As this option would reduce the rates for low strength alcohol, it would impact tax revenues for 
public authorities. These impacts are negligible for MS due to limited volume of sales that would 
be  covered  by  increasing  the  threshold  at  which  reduced  rates  apply  for  low  strength  alcohol. 
There  would  be  no  significant,  if  any,  requirement  for  additional  enforcement  resources. 
Similarly there would be little, if any, additional costs for businesses. 

Coherence 

It is not clear in the Directive as to the objective of this reduction and therefore it is difficult to 
judge its coherence. However reduced rates promote an alternative to high strength beers in line 
with public health objectives.    

57 

 
 
7.3.2.  Stakeholders' views 

Respondents  to  the  OPC  agreed  with  the  option  clarifying  the  rules  for  the  cross-border 
recognition of small producers, as well as the rules to determine when a producer is independent. 
The  consensus  is  almost  unanimous  within  the  beer  industry,  where  more  than  90%  of 
respondents  are  in  favour  of  these  changes,  without  significant  differences  between  SMEs  and 
other entities. Also taking into account the whole sample of respondents, more than 60% of them 
agreed or strongly agreed with this option. The provision of non-binding guidelines while leaving 
the  legislative  text  unchanged  was  also  positively  assessed  by  respondents,  from  both  the  beer 
industry  and  the  overall  sample.  However,  the  support  for  non-binding  guidelines  was  milder, 
with about half of the respondents agreeing to this. 

The response to the OPC in relation to extending the reduced rates to cider was small and mixed. 
Producers  of  OFB  (or  representative  thereof)  were  somehow  more  negative  than  others. 
However, industry responses should be considered cautiously, as only one respondent out of 31 is 
exclusively  active  in  the  OFB  market.  Tax  authorities  either  welcomed  or  did  not  oppose  the 
possibility of granting reduced rates to small cider makers. 

Results  from  the  OPC  conducted  on  the  revised  threshold  for  low  strength  beer  also  provide  a 
mixed picture. While 47% of participants who responded to this question welcome an increase in 
the threshold of low-strength beer from 2.8% to 3.5% vol, 44% of participants disagree with this 
policy option. Most respondents who support the raise in the threshold for low-strength beer are 
beer producers, while most respondents against it are other alcoholic beverages producers.   

7.3.3.  Comparison summary and preferred option 

Option 

EFFECTIVENESS 

1.a.1 – 
amend 
Directive 

1.a.2 – non 
binding 
guidelines  

1.b.1 - 
recognition 

2 – 
small 
cider 
makers 

3 – low 
strength 

No 
change* 

any 

and 

and 

correcting 

ensuring fair treatment of businesses 
across all alcohol sectors 
preventing 
distortions of competition 
providing  clear  rules  on  the  scope, 
classification  and  calculation  of 
duties for businesses and MS 
providing 
efficient 
clear 
conditions to determine denaturation 
procedures 
reducing  administrative  burden  and 
compliance costs for businesses and 
tax authorities 
provide legal certainty 
strengthening the fight against fraud 
and tax evasion 
improving human health protection 
EFFICIENCY 
administrative burden 
tax revenues 
COHERENCE 

OVERALL 
STAKEHOLDERS OPINION 

n/a 

n/a 

+ 

++ 

++ 

+ 

++ 

n/a 

+ 
0 

+ 
++ 
+ 

+ 

++ 

+ 

0 

++ 

0 

0 
0 

+ 
++ 
+ 

+ 

+ 

++ 

0 

+ 

0 

0 
0 

0 
++ 
+ 

0 

0 

0 

0 

0 

0 

0 
0 
0 

++ 

++ 

+ 

+ 

++ 

n/a 

+ 
0 

+ 
+ 
++ 

++ 

++ 

+ 

+ 

+ 

n/a 

+ 
0 

+ 
++ 
+ 

58 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defining the term 'legally and economically independent' is the ultimate aim of option 1.a, which 
could be achieved by a regulatory or non-regulatory approach. It should be noted that a certain 
level  of  consensus  already  exists  among  MS  authorities  and  as  non-binding  interventions  have 
already  proved  effective  in  defining  the  conditions  of  applying  reduced  rates  to  small  brewers, 
therefore the net benefits of using a non-binding instrument would seem to outweigh those of a 
legislative revision. 

In  terms  of  improving  the  cross-border  implementation  of  this  relief,  the  regulatory  ex-ante 
approach (Option 1.b.1) as a complement to Option 1.a.2 is preferred to the current absence of a 
harmonised approach, as this would ensure consistency throughout the EU. The preferred option 
is therefore a combined Option 1.a.2 + 1.b.1. 

Option  2  on  the  extension  of  the  reduced  rates  to  small  ciders  makers  and  the  increase  of  the 
alcoholic  threshold  (Option  3)  to  which  reduced  rates  are  applicable  for  beer  are  the  policy 
choices for their respective problem areas. 

The package of options under the cluster of measures relating to reduced rates issues is therefore 
composed of the combination of Option 1.a.2, 1.b.1, Option 2 and Option 3.  

7.4.  Unclear provisions to measure Plato degree for sweetened / flavoured beer 

7.4.1.  Comparison of options 

Effectiveness 

As  discussed  above,  policy  option  1  and  2  have  the  same  target  (i.e.  selecting  a  harmonised 
approach  for  the  measurement  of  Plato  degree  of  sweetened/flavoured  beer)  but  are  based  on 
different  measures:  a  regulatory  amendment  of  Art.  3(1)  (option  1  and  its  sub-options)  or  non-
binding guidelines (option 2 and its sub-options). The extent to which the options will meet the 
policy objectives clearly depends on the degree of adoption / compliance across MS. In the case 
of  option  1  we  can  assume  full  compliance  by  all  authorities,  while  the  adoption  of  guidelines 
(option  2)  would  not  be  mandatory,  so  MS  may  not  conform  to  the  suggested  measurement 
approach. This distinction is particularly important when it comes to impacts on legal certainty, 
since  the  persistence  of  disparities  of  interpretation  across  the  EU  may  eventually  encourage 
rather than decrease the risk of disputes between businesses and tax authorities, especially in MS 
that  would  eventually  not  adopt  the  Commission’s  guidance.  As  noted  above  all  stakeholders 
interviewed  advised  that  they  would  only  reluctantly  switch  away  from  their  current  approach 
unless binding changes are made in the Directive. 

Efficiency 

Policy options 1 and 2 do not pose any (in)efficiency problems although both would require some 
adjustment costs in the adaptation of some control and monitoring processes. It should be recalled 
that  different  MS  will  have  different  baseline  scenarios,  depending  on  which  method  they 
currently use and to which method they would need to switch. From the analysis of impacts it is 
apparent that selecting approach A or B1 would result in an overall decrease in excise receipts 
from  sweetened/flavoured  beer  of  more  than  EUR  30  million  (about  -25%),  compared  to  the 
baseline situation. Selecting approach B2 would result in relatively smaller changes since this is 
the  approach  currently  in  force  in  most  of  MS  and  also  the  one  generating  the  highest  excise 
revenues. Moreover, approach B2 that allows authorities to perform checks directly on the end-
products, with no need for on-site inspections and/or measurement during the production process, 
would be more cost-effective. It could be argued that approach B2, as less disruptive and more 
widespread already, would be, collectively, more efficient.     

59 

 
 
 
 
Coherence 

Directive  92/83/EC  gives  MS  the  choice  to  levy  excise  duty  on  beer  on  the  basis  of  either  the 
number  of  hectolitres/degrees  Plato  or  the  number  of  hectolitres/degrees  of  ABV.  The 
coexistence  of  the  methods  was  analysed  in  the  Ramboll  evaluation,  which  concluded  that  this 
situation  created  no  major  difficulties  or  negative  consequences  for  the  internal  market.  This 
conclusion was widely supported by MS and beer producers as the Plato measurement is based 
on long-standing tradition in many MS.  

None  of  the  retained  options  clarifying  the  measurement  method  stand  in  contradiction  to  this 
preference  and  all  options  are  therefore  in  principle  coherent  with  the  legislation  and  with  the 
smooth functioning of the single market. As stated in the present impact assessment, the problem 
at stake regarded not the relevance of existence of the Plato/AVB methods but the stakeholders – 
authorities  and  businesses  -  understanding  of  Art.  3(1)  with  regard  to  at  what  point  in  the 
production process the degree Plato should be measured. 

Since the choice of option implies switching to one or the other Plato measurement approach, it 
will  inevitably  impact  some  countries  more  than  the  others.  From  the  perspective  of  countries 
which will need to adjust their processes and procedures to comply with the new approach, the 
options  could  be  perceived  as  incoherent  in  terms  of  correspondence  with  the  present  national 
practice.  However,  given  that  the  lack  of  coherence  in  application  of  the  Plato  measurement 
method is the very problem at stake behind the present initiative, the coherence aspects should be 
seen  from  the  perspective  of  the  single  market.  In  that  case  all  options  are  coherent  with  the 
objective of ensuring smooth functioning of the single market and ensuring coherence of product 
treatment in each geographical market.  

In  terms  of  external  coherence,  the  Plato  measurement,  being  of  technical  nature,  has  no 
perceived impact on other EU policies, regardless of the chosen option.  

7.4.2.  Stakeholders views 

The  level  of  agreement  of  the  OPC  participants  varies.  A  small  majority  of  respondents  (53%) 
believe  it  is  necessary  to  amend  Art.  3(1)  of  the  Directive  and  to  clarify  the  term  ‘finished 
product’ with regard to sweetened/flavoured beer; however, 38% disagree with it. The percentage 
of  stakeholders  against  an  amendment  of  Art.  3(1)  grows  if  only  beer  industry  respondents  are 
considered (56%, against only 37% in favour of a policy change). 

There  is  instead  greater  consensus  on  the  need  to  provide  non-binding  guidance  on  this  issue: 
61%  of  respondents  (and  70%  of  beer  industry  stakeholders)  are  in  favour  of  non-regulatory 
approach under option 2 and its sub-options. In their qualitative contribution to the OPC, several 
industry players mentioned the need to adopt either approach A or B1, as approach B2 in their 
view  is  ‘technically  incorrect’.  Interestingly,  some  respondents  have  emphasised  that  the  most 
effective solution would be the application of the ABV method to sweetened/flavoured beer. A 
few respondents were concerned of the uncertainty and believe that significant room for tax fraud 
would be generated by selecting approach A or B1. 

In  some  MS  included  in  the  studied  sample,  all  stakeholders  (including  beer  producers)  would 
only reluctantly switch away from approach B2. In other MS, brewers exerted some pressure to 
stop using approach B2, despite the latter being the preferred approach by tax authorities; these 
countries may be more open for a change. MS currently adopting approach A or B1 are unlikely 
to change to approach B2 unless binding changes are made in the Directive.  

60 

 
 
7.4.3.  Comparison summary and preferred option 

Option: A (before sugar) 
B1 (real extract) B2 (present extract) 

EFFECTIVENESS 
ensuring  fair  treatment  of  businesses  across  all 
alcohol sectors 
preventing  and  correcting  any  distortions  of 
competition  
providing clear rules on the scope, classification 
and calculation of duties for businesses and MS 
providing  clear  and  efficient  conditions  to 
determine denaturation procedures 
reducing administrative burden and compliance 
costs for businesses and tax authorities  
provide legal certainty 
strengthening  the  fight  against  fraud  and  tax 
evasion 
improving human health protection 
EFFICIENCY 
administrative burden 
tax revenue 
COHERENCE 

OVERALL 
STAKEHOLDERS OPINION 

–

1.A 
reg. 

2.A  – 
non 
reg. 

1.B.1 
– reg. 

2.B.1 
–  non 
reg. 

1.B.2 
– reg. 

 2.B.2 
–  not 
reg. 

No 
change* 

regulatory (reg.) and non-regulatory (non reg.) 

++ 

++ 

++ 

+ 

++  

+ 
- 

+ 
- 
+ 

+ 

+ 

+ 

+ 

+ 

+ 
- 

+ 
0 
++ 

++ 

++ 

++ 

+ 

++ 

+ 
- 

+ 
- 
+ 

+ 

+ 

+ 

n/a 

+ 

+ 

n/a 

n/a 

+ 
- 

+ 
0 
+ 

++ 

++ 

++ 

+ 

++ 

+ 
0 

+ 
++ 
+ 

+ 

+ 

+ 

+ 

+ 

+ 
0 

+ 
+ 
++ 

0 

0 

0 

0 

0 

0 
0 

0 

The  objective  of  legal  clarity  in  this  area  is  necessary  as  divergent  interpretations  of  the  term 
'finished  product'  exist  within  the  EU.  While  the  regulatory  and  non-regulatory  options  would 
result in similar impacts on the markets, the compliance with these options may differ. Given the 
clear  benefits  for  all  of  legal  certainty,  the  options  of  amending  the  Directive  are  the  preferred 
option as being the only one that would ensure compliance. When it comes to choosing between 
approaches  B1  and  B2,  the  key  distinction  between  the  two  is  the  efficiency  of  their 
implementation. As argued above, the approach B2 is considered – collectively - less disruptive 
to the internal market as a whole and raising most excise revenues for the MS.  

Taking these considerations into account, the preferred option appears to be a legislative revision 
of the Directive, standardising approach B2 of Plato measurement – Option 1.B.2. 

It must be recalled at this point in time that the preferred option stems directly from the objective 
analysis but it does not take into account the upcoming CJEU ruling. The precise scope and the 
extent  to  which  the  CJEU  will  clarify  all  outstanding  uncertainties  of  the  Plato  situation  is 
unknown.  If  the  CJEU  rules  contrary  to  the  preference  stated  above,  the  former  will  take 
precedence and the jurisprudence will be duly reflected in the revised Directive. 

7.5.  Summary of preferred package of options 

This  paragraph  provides  an  overview  of  the  preferred  options  corresponding  to  the  identified 
problems. 

7.5.1.  Dysfunctions in the application of exemptions for denatured alcohol 

Mutual recognition of CDA 

61 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  preferred  option  is  a  regulatory  amendment  of  the  Directive  to  ensure  that  the  divergent 
interpretations involving MS that have notified CDA formulations other than the Eurodenaturant 
will  be  eliminated  and  legal  certainty  will  be  achieved  (Option  1).  This  option  means  a 
codification of the existing practice. Each MS would have to recognise CDA produced in another 
MS using the formulations notified by that particular MS, but not those notified by any other MS. 
This  would  mean  that  MS  retain  control  over  the  CDA  produced  within  their  territories,  while 
being obliged to also exempt any CDA legally produced in another MS. This option will reduce 
any  remaining  trade  barriers  and  distortions  and  consolidates  MS  desires  for  a  harmonised 
solution for CDA into a legal text.  

PDA formulations 

The preferred option is a regulatory amendment of the Directive to clarify the unclear wording of 
the  Directive  to  increase  the  legal  certainty  for  indirect  uses  and  ‘finished  product’  containing 
PDA  (Option  4)  accompanied  on  an  optional  basis  by  Option  3  (capacity/confidence  building 
measures). The clarification would make reference to a 'finished product' in order to provide MS 
with  flexibility  for  the  various  product  groups  using  PDA.  This  option  would  also  define  a 
quantitative line above which a product containing denatured alcohol must always be moved in 
accordance with Chapter IV of Directive 2008/118/EC. This will be included as an amendment to 
the Directive. This option would eliminate the ambiguity and uncertainty that currently exists in 
relation to PDA.  Moreover, it would ensure equal treatment of goods containing PDA across the 
EU  and  reduce  the  risk  of  costs  associated  with  disputes  between  businesses  and  national 
authorities. 

7.5.2.  Dysfunctions in the classification of certain alcoholic beverages 

The  preferred  option  is  to  split  the  OFB  category  into  two  subcategories  of  which  one  would 
maintain  the  current  treatment,  while  the  other  would  ideally  comprise  of  all  traditional  OFB 
products (i.e. cider and perry etc.) which would be defined and treated separately (Option 2.a). 
This  option  aims  to  differentiate  the  OFB  products  that  arguably  correspond  to  the  original 
that  have  been 
definition  and 
opportunistically  designed  to  fit  into  it  or  simply  that  do  not  fit  elsewhere.  This  option  would 
result in legal certainty at EU level and a consistent treatment of borderline products across MS 
since  it  would  make  the  current  national  level  non-harmonised  distinctions  unnecessary.  This 
option  can  be  complemented,  on  an  optional  basis,  by  Option  3.a  /Option  3.b/Option 
4.a/Option 4.b.  

the  ‘novel’  products 

legislator  from 

intention  of 

the 

7.5.3.  Dysfunctional application of reduced rates 

Legally and economically independent small brewer 

The preferred option is to define the term ‘legally and economically independent’ by non-binding 
guidelines (Option 1.a.2). Such definition would encompass the general norms and principles as 
well  as  detailed  technical  specification  outlining  the  legal  conditions  which  could  determine  if 
companies  are  independent  or  not.  There  is  already  a  certain  level  of  consensus  among  MS 
authorities and non-binding interventions have already proved effective in defining the conditions 
of applying reduced rates to small brewers. 

To  ensure  that  the  conditions  for  recognition  of  small  brewers  are  the  same  in  each  MS,  the 
preferred  option  is  to  identify  small  brewers  through  a  uniform  certificate,  defined  via  a 
Commission  Implementing  Regulation  (Option  1.b.1).  This  certificate  would  need  to  be 
presented  when  a  small  brewery  would  like  to  claim  reduced  rates  in  a  MS  other  than  that  of 
establishment. This certificate should be provided, upon request, by all customs authorities to all 
businesses up to 200,000 hl, regardless of whether they can access reduced rates in their country 

62 

 
 
of establishment. This certificate could be developed through the Fiscalis programme and would 
guarantee equal conditions for small brewers active across borders. 

Extending reduced rates for small producers to other sectors 

To address the unfair competition between small producers of alcoholic beverages, the preferred 
option is to amend the Directive and extend the reduced rates to small cider makers (Option 2). 
As for the small brewers reduced rates, this reduced rate would remain optional for MS. It would 
be based on the definition of an independent producer and a maximum discount rate compared to 
the  standard  rate  would  be  fixed.  The  maximum  yearly  output  threshold  would  be  15  000 
hectolitres per year to allow small cider makers to benefit from the reduced rates if MS make use 
of the option to apply a reduced rate. This option has limited impacts in terms of costs and would 
improve the competitiveness of cider makers. 

Increasing the threshold for low strength beer 

 The preferred option is to increase the threshold to which reduced rates are applicable to beer as 
this would encourage the development of low strength beers (Option 3). 

7.5.4.  Unclear provisions to measure Plato degree for sweetened / flavoured beer 

The  preferred  option  is  to  clarify  the  definition  of  ‘finished  product’  by  outlining  when  the 
measurement  of  Plato  degree  should  occur  (Art.  3(1)  of  the  Directive)  (Option  1.b.2).  This 
option consists of a regulatory amendment to clarify that the term ‘finished product’ refers to the 
end-product  that  is  released  for  consumption,  meaning  that  that  sugars  or  flavours  added  after 
fermentation would contribute to the Plato degree. This option would provide legal clarity of the 
term ‘finished product’. The regulatory  amendment will ensure full compliance and is the least 
disruptive of the internal market, taking account of the current approaches on national level. 

8.  REFIT (SIMPLIFICATION AND IMPROVED EFFICIENCY)  

8.1.  Context, methodology and constraints 

Revision  of  Directive  92/83/EEC  on  the  structures  of  excise  duty  on  alcohol  and  alcoholic 
beverages is part of the Commission's REFIT programme. One of the original objectives behind 
the  Ramboll  study  was  to  identify  weaknesses  in  the  legislative  environment  caused  by  the 
Directive  resulting  in  negative  consequences  for  the  stakeholders  (e.g.  obstacles  to  the 
functioning of the internal market, competitive disruptions, administrative and compliance costs.)  

Before analysing further, it is important to understand that despite this original level of ambition, 
the Ramboll evaluation28 and the Study clearly concluded that, overall, Directive 92/83/EEC did 
not  directly  impose  compliance  costs  on  economic  operators.  Instead  by  including  certain 
products  in  the  scope  of  excise  duty,  the  Directive  indirectly  subjected  those  products  to  the 
provisions  of  Directive  2008/118/EC,  which  sets  out  the  rules  and  conditions  for  holding  and 
moving excise goods. Additionally, MS exercise some level of flexibility regarding provisions at 
national level and requirements regarding certain procedures (see below). 

28 See: Chapter 2.5, p. 36 of the Ramboll evaluation 

63 

 
 
 
                                                 
The  resulting  room  for  diverging  interpretation  since  1992  involuntarily  allowed  economic 
operators, as well as national tax administrations, to establish their own modus operandi. Most of 
the problems identified – as described in the problem definition section – were specific to certain 
markets  or  certain  products.  In  terms  of  REFIT  objectives,  these  focused  particularly  on  those 
areas  where  economic  operators  reported  burdens.  Taking  into  account  the  considerations 
presented  above,  in  the  case  of  Directive  92/83/EEC  the  REFIT  discussion  is  therefore  shifted 
from not so much the excessive costs and burdens to unnecessary costs and burdens, which could 
be avoided if the Directive functioned better.  

Overall, evidence collected in the Ramboll evaluation, the Study and feedback gathered from the 
day-to-day  application  of  the  Directive's  provisions  led  to  the  conclusion  that  there  was 
nevertheless a perceivable – albeit hardly quantifiable – lack of legal certainty over the treatment 
of specific products, leading in turn to potential additional costs to economic operators. The lack 
of  certainty  could  be  classified  under  the  'hassle'  or  'irritation'  costs,  which  are  often  linked  to 
administrative  burdens  and  constitute  residual  category  of  direct  costs,  which  are  difficult  to 
quantify or monetise and to relate to a specific information obligation. Such costs could include 
administrative  delays,  opportunity  costs  of  waiting  time,  etc.  The  stakeholders  were  not  in  a 
position to provide any estimates of the monetary impacts of the lack of legal certainty; what we 
have  obtained  were  the  subjective  opinions  of  the  best  placed  stakeholders:  the  economic 
operators and administrations. These aspects are nevertheless an important indicator of the 'well-
being' of the stakeholders.  

As  stated  above,  the  majority  of  problems  relate  to  the  legal  uncertainty  that  the  economic 
operators  experience  with  production,  use  and/or  movement  of  some  alcoholic  products 
(governed by different law even though the stakeholder may not be aware of it). For example, in 
the  area  of  denatured  alcohol,  the  main  concern  of  the  economic  operators  regarding 
administrative  burdens  was  linked  to  the  specific  requirements  regarding  supervision  of 
production  and  movement  of  products  containing  denatured  alcohol,  which  cannot  be  directly 
linked to the provisions of the Directive 92/83/EEC, and which represented a mix of compliance 
with the above-mentioned Directive 2008/118/EC or the national-level response of some MS to 
their  estimations  of  the  risk  of  fraud.  In  the  area  of  classification,  the  Ramboll  evaluation 
concluded  that  the  classification  of  most  alcoholic  beverages  from  an  excise  perspective  was 
generally straightforward and resulted in little to no direct administrative burdens. It identified at 
the  same  time  costs  resulting  from  the  complications  and  disputes  arising  from  situations  in 
which the stakeholders disagree on the correct interpretation of the provisions of the Directive.  

Therefore, in the context  of the present initiative, the  REFIT aspects  related predominantly to 
identifying  opportunities  for  simplification,  reduction  of  inconsistencies,  gaps  and  other 
ineffective measures which can lead to unnecessary costs. Most of the opportunities are linked to 
elimination of the legal uncertainty over the interpretation of certain ambiguous provisions.            

Both  the  Ramboll  Evaluation  and  the  Study  attempted  to  gather  estimates  of  these  costs. 
Unfortunately,  only  anecdotal  evidence  (and  without  monetised  disadvantages)  was  available 
where  the  problems  resulted  in  legal  disputes  before  the  CJEU.  For  example,  in  terms  of  the 
classification  problems,  the  economic  operators  were  not  in  a  position  to  provide  precise 
monetary quantification of the expected cost due to the varied nature of the legal cases reported 
(e.g.  depending  on  the  evolution  of  a  given  case,  the  economic  importance  of  the  disputes,  the 
willingness  of  the  parties  to  settle  the  matter  via  the  judicial  system,  etc.).  Some  anecdotal 
evidence  was  provided  by  a  few  MS  or  economic  operators,  relating  to  specific  cases.  Such 
evidence is duly reported under the problem definition of this report to illustrate the problems, but 
cannot stand for the baseline against which any cost and burden reduction measurement could be 
calculated.  

64 

 
 
Having no baseline, it was equally, if not more difficult to estimate any potential benefits of the 
proposed  changes.  This  difficulty  is  reflected  in  the  table  below,  where  the  analysis  of  the 
expected  regulatory  benefits  is  presented  qualitatively.  Any  estimates  provided  are  often 
hypothetical,  based  on  a  rigorous  set  of  assumptions  which were  explained  under  each  specific 
option under the analysis of impacts. Moreover, most of the quantification relate to the cost side 
of the REFIT given that most of the benefits did not have a quantifiable base to start from. That 
should  by  no  means  indicate  that  there  would  be  no  REFIT-type  benefits  stemming  from  the 
initiative.  To  the  contrary,  the  Study  concluded  that  the  additional  regulatory  costs  to  comply 
with any new rules are mostly one-off and not significant in the broader scale, quickly offset by 
the benefits. The difficulty lays in the lack of numerical baseline values for most of the data.  

To conclude, it should also be noted that the burdens stemming from (mostly) legal uncertainty 
would have been burdens only to the businesses operating fairly in the markets. The burdens for 
them  would  however  be  an  opportunity  for  those  businesses  who  intended  to  profit  from  the 
unclear legislation by, for example, marketing products that would resemble high alcohol content 
products taxed at a higher rate but which would fall under the preferential OFB category. In such 
situations, the net beneficiaries of the initiative would be the honest businesses trying to comply 
while being exposed to unfair treatment. Since the Study concluded that the additional costs and 
burdens for any solution were found marginal and off-set by benefits, it could be concluded that 
the  net  outcomes  will  be  globally  positive  for  all  stakeholder  negatively  affected  by  the  status 
quo.  

Summary of REFIT costs and costs reduction  

REFIT Cost reduction – Preferred Option(s) 

Description 

Estimates 

Comments 

Main 
beneficiaries 

Minor positive impacts for 
producers that sell CDA to 
MS with different national 
formulations, and users of 
CDA in these MS stemming 
from lower risks of disputes 
with authorities of the 
receiving MS 

Cost savings stemming from 
enhanced clarity surrounding 
the legal meaning and uses of 
PDA which would ensure 
equal treatment of goods 
containing PDA across the 
EU and reduce the risk of 
costs associated with disputes 
between businesses and 
national authorities 

1
M
E
L
B
O
R
P

l
o
h
o
c
l
a
d
e
r
u
t
a
n
e
D

n/a 

n/a 

The reduction of the hassle costs – 
and subsequently elimination 
thereof - associated with the 
disputes and delays due to non-
recognition of CDA methods 
were not possible to estimate 

CDA producers 
operating cross-
border 

The savings stemming from the 
legal costs related to disputes over 
the PDA and their use in other 
products - and subsequently 
elimination thereof-  are case-
specific and the baseline values 
were not reported by the 
stakeholders to allow for 
estimations of benefits 

PDA users and 
producers operating 
cross-border 

National 
administrations 
(customs 
laboratories) 

2
M
E
L
B
O
R
P

  Legal certainty at EU level 
n
and consistent treatment of 
o
i
borderline products across 
t
a
MS. However,  the distinction 
c
i
f
between the products may 
i
s
s
lead to the creation of new 
a
l
borderline products which 
C
could, in worst case scenario, 

Overall burden not 
expected to change 
significantly (€ 2.0 – 
2.5 million)    

Familiarisation cost: 
approx. €4,500 per 
company (including 

One-off reclassification costs of 
familiarisation costs, updating of 
the IT systems, and national 
procedures, training for economic 
operators are to be expected. 
These costs would be offset by 
the benefits in 10 years or more 

Cider/perry 
producers across the 
EU 

National 
administrations 

65 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
neutralise benefits of any new 
clear definition 

3
M
E
L
B
O
R
P

s
e
t
a
r
d
e
c
u
d
e
R

In terms of recognising the 
status of a legally and 
economically independent 
brewery, more legal clarity 
and ease of doing business for 
cross-border economic 
operators will result thanks to 
the EU-wide certificate for 
small breweries 

overheads) or  
aggregated burden of  
€ 4.5 million  

IT updates: approx. 
€800 per company or 
aggregated burden of 
to € 6.9 million.   

Recognised small 
brewers: total 
burdens for 675 
operators in the 
sample MS: approx. 
€13 000 or 2% of the 
burdens estimated for 
the overall scheme; 

Not yet recognised 
small brewers: total 
burden for 180 
operators in the 
sample MS not under 
the scheme: approx. 
€32 000 or 5% of the 
burdens estimated for 
the overall scheme. 

Established / recognised small 
brewers would incur limited 
administrative or enforcement 
costs (equalling to asking for the 
certificate), while these who are 
not recognised as small brewers 
would need to prove their status 
first  

Small breweries 
across the EU 

In terms of extending the 
reduced rate scheme to small 
cider makers, the burdens 
associated with compliance 
with the scheme would be 
similar to those incurred by 
small breweries 

Annual burdens per 
small cider maker: 
approx. €178 per 
economic operator or 
an aggregated total 
for the sector of 
€200,000 annually  

Small cider 
producers across the 
EU 

3
M
E
L
B
O
R
P

  Legal certainty and reduction 
e
in legal costs of judiciary 
e
r
disputes stemming from 
g
e
d
eliminating disparities of 
o
interpretation of Plato 
t
a
measurement methods 
l
P
across the EU 

n/a 

The amount of legal costs related 
to disputes over the measurement 
method for excise tax base were 
not provided by the stakeholders, 
which makes it impossible to 
estimate savings linked to their 
elimination 

Breweries 
National 
administrations 

9.  HOW WOULD ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The  monitoring  of  the  implementation  and  functioning  of  the  revised  rules  will  be  role  of  the 
ExComm,  an  advisory  committee  on  excise  issues  chaired  by  the  Commission  in  which 
representatives  of  all  MS  participate.  The  ExComm  will  report  on  any  problems  with  the 
implementation and the evolution of problems with the functioning of the Directive as addressed 
in  this  impact  assessment,  and  discuss  and  clarify  possible  interpretation  issues  between  MS 
regarding the new legislation. In case new legislative developments are required, the ITEG might 
be further consulted.  

MS and the Commission will evaluate the functioning of the evolutions provided for in the new 
legislation. To that purpose, MS will communicate to the Commission any relevant information 
as regards the level and the evolution of the regulatory costs, legal certainty, economic distortions 
and market abuse, excise fraud, etc. necessary for the evaluation of the effectiveness, efficiency, 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
coherence  with  other  interventions  with  similar  objectives,  and  continued  relevance  and  EU 
added  value  of  the  new  legislation.  The  evaluation  should  also  seek  to  collect  input  from  all 
relevant  stakeholders  as  regards  the  level  and  the  evolution  of  their  administrative  burden  and 
compliance costs or instances of market distortions. The Commission will prepare the evaluation 
at the earliest 5 years after its entry into force, allowing the markets to adjust and the results and 
impacts to materialise. 

Without  prejudging  the  exact  scope  and  extent  of  the  future  evaluation  and  the  ongoing 
monitoring,  both  of  which  will  live  and  evolve  together  with  the  functioning  of  the  revised 
Directive, the tables in Annex 18 provide an indicative overview of key expected results and/or 
impacts  and  accompanied  by  examples  of  possible  indicators  expected  to  feed  into  their 
assessment.  

The  indicators  are  set  either  at  the  result-level  (e.g.  number  of  instances  of  non-compliance, 
number of law cases, existence and number of diverging interpretations, reduced cross-country 
disparities, etc.) or at the impact-level (e.g. changes in the market structure of the OFB, revenues 
from excise duties, improved competitiveness, reduced scope for misclassification, costs savings 
and investment, etc.). The result-level indicators can and will be regularly reviewed through the 
works  of  the  committees  and  the  Commission  and  will  feed  into  the  future  evaluation.  The 
impact-level indicators, given their far-reaching nature, sheer complexity and burdens associated 
with their collection and/or assessment, will only be analysed at the moment of the retrospective 
evaluation through a multi-pronged approach involving many stakeholders and detailed data. This 
distinction  is  marked  in  the  monitoring  and  evaluation  table  in  Annex  18  and  is  important  to 
retain.  

Additionally, since the industry producing and/or using alcohol and alcoholic beverages is active 
and  closely  follows  the  work  of  the  Commission,  it  is  expected  that  any  issues  related  to  the 
application of the new rules, would be reported without much delay directly by the stakeholders. 
That could be done either by contacting the respective Commission services or through tabling of 
motions for actions through the REFIT Platform, for example29.  

It  would  have  been  preferable  to  set  success  criteria  and  benchmark  values  for  the  expected 
changes.  However,  having  no  firm  value  for  most  of  the  problems  (detailed  analysis  and 
explanations are included in the annexes relating to drivers of the problems as well as Chapter 8 
on REFIT considerations), it is unfeasible to set measurable targets. Presently, it is only possible 
to  foresee  analysis  of  trends  or  market  structures,  which  would  be  done  mostly  through  a  full 
economic study accompanying the future evaluation.   

29 Proposals tabled to the REFIT platform already took place in the excise duty on alcoholic beverages: XVIII.12.b 
on reducing the room for diverging interpretations of rules for the wine and spirits industry and  XVIII.12.a from 
the whiskey producers; 

67