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: 2018-06-07
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, 7.6.2018 SWD(2018) 259 final /2  This document corrects document SWD(2018) 259 final of 25.05.2018. The annexes were not included.  The text shall read as follows: 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 .......................................................................................................... 4 

1.1. 

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

1.2. 

Scope for reforms .......................................................................................................................5 

2.  What is the problem and why is it a problem? ......................................................................... 5 

2.1. 

Introduction ................................................................................................................................5 

2.2. 

Scope of the problems................................................................................................................6 

2.3. 

Problem 1 - Dysfunctions in the application of exemptions for denatured alcohol ..................6 

2.4. 

Problem 2 – Dysfunctions in the classification of certain alcoholic beverages ....................... 10 

2.5. 

Problem 3 – Dysfunctional application of reduced rates ........................................................ 18 

2.6. 

Problem 4 – Unclear provisions to measure the Plato degree of sweetened / flavoured beer23 

2.7. 

Conclusion ............................................................................................................................... 26 

3.  Why should the EU act? ......................................................................................................... 26 

4.  What should be achieved? ...................................................................................................... 27 

4.1. 

General objectives ................................................................................................................... 27 

4.2. 

Specific objectives ................................................................................................................... 28 

5.  What are the various options to achieve the objectives? ........................................................ 28 

5.1. 

Link between problems/drivers and options .......................................................................... 28 

5.2. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 31 

5.3. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 33 

5.4. 

Dysfunctional application of reduced rates ............................................................................ 37 

5.5.  Measurement of Plato degree for sweetened / flavoured beer ............................................. 39 

6.  What are the impacts of the different policy options and who will be affected? ................... 40 

6.1. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 41 

6.2. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 42 

6.3. 

Dysfunctional application of reduced rates ............................................................................ 46 

6.4.  Unclear provisions to measure of Plato degree for sweetened / flavoured beer .................. 48 

7.  How do the options compare? ................................................................................................ 50 

7.1. 

Dysfunctions in the application of exemptions for denatured alcohol ................................... 50 

7.2. 

Dysfunctions in the classification of certain alcoholic beverages ........................................... 53 

7.3. 

Dysfunctional application of reduced rates ............................................................................ 58 

7.4.  Unclear provisions to measure Plato degree for sweetened / flavoured beer ....................... 61 

7.5. 

Summary of preferred package of options ............................................................................. 63 

8.  REFIT (simplification and improved efficiency) ................................................................... 65 

8.1. 

Context, methodology and constraints ................................................................................... 65 

9.  How would actual impacts be monitored and evaluated? ...................................................... 68 

10.  ANNEXES ............................................................................................................................. 70 

ANNEX 1. 

Procedural Information ........................................................................................ 70 

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ANNEX 2. 

Synopsis report – Stakeholder consultation ......................................................... 77 

ANNEX 3.  Who is affected by the initiative and how ............................................................ 90 

ANNEX 4. 

Analytical Models used in preparing the Impact Assessment ............................. 95 

ANNEX 5. 

Council Conclusions (6 December 2016) ............................................................ 98 

ANNEX 6. 

Drivers of the dysfunctions in the application of exemptions for denatured alcohol
101 

ANNEX 7. 

Classification of alcoholic beverages ................................................................. 105 

ANNEX 8. 

Drivers of the dysfunctions in the classification of certain alcoholic beverages 113 

ANNEX 9. 

Tax, affordability and consumption ................................................................... 116 

ANNEX 9A      Excerpt from Annex 6a of the external evaluation (by Ramboll) ..................... 123 

ANNEX 10.  Reduced rates for other small producers ............................................................ 132 

ANNEX 11.  Driver of the dysfunctional application of reduced rates ................................... 142 

ANNEX 12.  Driver of the unclear provisions to measure the Plato degree of sweetened / flavoured 

beer 

143 

ANNEX 13.  Methodology for measuring the Plato degree .................................................... 144 

ANNEX 14.  Country-specific analysis of impacts of policy options for measuring Plato degree in 

sweetened/flavoured beer ..................................................................................................... 147 

ANNEX 15.  Assessment of the impact on the market of the re-classification of certain products

153 

ANNEX 16. 

Problems that will not be addressed within this impact assessment .................. 159 

ANNEX 17.  Comparison of impacts of alternative options ................................................... 160 

ANNEX 18.  Monitoring and Evaluation of Impacts .............................................................. 168 

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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 

3 

 
 
 
 
 
 
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. 

4 

 
 
                                                 
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 

5 

 
 
                                                 
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 

6 

 
 
 
 
 
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). 

7 

 
 
                                                 
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. 

8 

 
 
                                                 
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. 

9 

 
 
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 

10 

 
 
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 

11 

 
 
 
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.  

12 

 
 
 
 
                                                 
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 

13 

 
 
 
                                                 
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 

14 

 
 
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.  

15 

 
 
                                                 
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. 

16 

 
 
 
                                                 
‘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 

17 

 
 
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.  

18 

 
 
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'. 

19 

 
 
 
 
 
                                                 
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 

20 

 
 
 
 
 
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 

21 

 
 
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” 

22 

 
 
                                                 
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. 

23 

 
 
                                                 
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.  

24 

 
 
 
 
 
 
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. 

25 

 
 
                                                 
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) 

26 

 
 
                                                 
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. 

27 

 
 
 
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.  

28 

 
 
 
 
 
 
 
 
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. 

29 

 
 
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 

31 

 
 
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 

32 

 
 
 
enhance 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). 

33 

 
 
                                                 
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 

34 

 
 
 
 
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 

These approaches aim to differentiate the OFB products that arguably correspond to the original 
definition  and  intention  of  the  legislator  from  the  ‘novel’  products  that  have  been 
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: 

  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 

35 

 
 
 
 
 
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).  

36 

 
 
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.  

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. 

37 

 
 
                                                 
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  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). 

38 

 
 
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.  

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 

39 

 
 
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 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, 

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. 

40 

 
 
                                                 
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  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.  

41 

 
 
 
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.  

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. 

42 

 
 
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. 

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. 

43 

 
 
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.  

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  that  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.   

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, 

44 

 
 
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 
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. 

45 

 
 
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 
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  the  required  documents  (company  registration,  information  on 
shareholding, company charter etc.). Administrative burdens for the 180 operators not under the 

46 

 
 
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.    

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. 

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.  

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

47 

 
 
                                                 
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.  

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 

48 

 
 
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.  

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. 

49 

 
 
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. 

the  selection  of  a  harmonised  approach 

Finally, 
the  Plato  degree  of 
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.  

50 

 
 
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.  

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.  

51 

 
 
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 
COHERENCE 

OVERALL 
STAKEHOLDERS OPINION 

++ 

++ 

++ 

++ 

0 

++ 

+ 

0 

0 
0 

++ 
++ 
+ 

+ 

+ 

+ 

+ 

0 

0 

+ 

0 

0 
0 

+ 
0 
- 

0 

0 

0 

0 

- 

0 

+ 

0 

- 
0 

0 
0 
++ 

++ 

++ 

++ 

++ 

+ 

++ 

++ 

+ 

+ 
0 

+ 
++ 
- 

0 

0 

0 

0 

0 

0 

0 

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.  

52 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 
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-

53 

 
 
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.   

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 

54 

 
 
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.  

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 

55 

 
 
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.  

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 

1 – 

2a– new 

2b– new 

3a – CN 

3b – non 

4a – 

4b - EPC  No 

56 

 
 
EFFECTIVENESS 

CJEU 
rulings 

EN  

sub 
category 
for 
cider/ 
perry 

sub 
category 
for other 
mixed 
drinks 

binding 
guideline
s 

sectoral 
definitio
n 

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 
conditions 
determine 
to 
denaturation procedures 
reducing  administrative  burden 
for 
and 
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 
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.  

57 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 
'legally  and  economically 
the  legal  uncertainties  and  disparities  of  interpretations  of 
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 
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. 

58 

 
 
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.    

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. 

59 

 
 
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* 

to 

fair 

and 

treatment 

efficient 
determine 

ensuring 
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 
conditions 
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 

+ 
0 

+ 
+ 
++ 

++ 

++ 

+ 

+ 

+ 

n/a 

+ 
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 

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.  

60 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.     

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 

61 

 
 
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.  

7.4.3.  Comparison summary and preferred option 

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

–

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.) 

on 

the 

clear 

EFFECTIVENESS 
ensuring fair treatment of businesses across all 
alcohol sectors 
preventing  and  correcting  any  distortions  of 
competition  
providing 
scope, 
rules 
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 

++ 

++ 

++ 

+ 

++  

+ 
- 

+ 

+ 

+ 

+ 

+ 

+ 
- 

62 

++ 

++ 

++ 

+ 

++ 

+ 
- 

+ 

+ 

+ 

n/a 

+ 

+ 

n/a 

n/a 

+ 
- 

++ 

++ 

++ 

+ 

++ 

+ 
0 

+ 

+ 

+ 

+ 

+ 

+ 
0 

0 

0 

0 

0 

0 

0 
0 

 
 
 
 
 
 
 
 
 
COHERENCE 

OVERALL 
STAKEHOLDERS OPINION 

+ 
- 
+ 

+ 
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 

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 

63 

 
 
 
 
 
 
 
 
 
 
 
 
 
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 
definition  and  intention  of  the  legislator  from  the  ‘novel’  products  that  have  been 
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.  

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 
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). 

64 

 
 
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). 

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 

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

65 

 
 
 
                                                 
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.  

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 

66 

 
 
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

2
M
E
L
B
O
R
P

n
o
i
t
a
c
i
f
i
s
s
a
l
C

Legal certainty at EU level 
and consistent treatment of 
borderline products across 
MS. However,  the distinction 
between the products may 
lead to the creation of new 
borderline products which 
could, in worst case scenario, 
neutralise benefits of any new 
clear definition 

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) 

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

Familiarisation cost: 
approx. €4,500 per 
company (including 
overheads) or  
aggregated burden of  
€ 4.5 million  

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

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 

67 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 

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, 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. 

68 

 
 
 
 
 
 
 
 
 
 
 
 
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; 

69 

 
 
 
 
                                                 
10.  ANNEXES 

ANNEX 1.  PROCEDURAL INFORMATION 

1. 

Lead DG, Decide Planning/CWP references 

The lead DG is DG TAXUD. 

This initiative got the following political agreements: 
-  Agenda Planning: Proposal for revision of Council Directive 92/83/EEC of 19 October 1992 
to  alcohol  and  alcoholic  beverages. 

the  structures  of  excise  duty  applied 

on 
(2017/TAXUD/005) 

-  Inception  Impact  Assessment:  Proposal  for  revision  of  Council  Directive  92/83/EEC  of  19 
October  1992  on  the  structures  of  excise  duty  applied  to  alcohol  and  alcoholic  beverages. 
(Ares(2017)1097709) 

-  Commission Work Programme: 2017 Annex II initiative 7 

2.  Organisation and timing 

The  following  DG  were  invited  to  the  Inter-Service  Steering  Group  (ISSG):  AGRI,    COMP, 
JRC, GROW, OLAF, RTD, SANTE, SG, SJ, TRADE.  

An  independent  study  was  carried  out  in  2014/2016  by  a  consortium  led  by  Ramboll 
Management Consulting.30 The recommendations and findings of the Ramboll Evaluation were 
taken  into  account  in  the  Commission’s  report  submitted  to  the  Council  in  October  2016 
(hereinafter the ‘Commission Report’)31. 

A  grouping  led  by  Economisti  Associati  s.r.l.  and  including  the  Centre  for  European  Policy 
Studies (CEPS),  CASE  - Center  for Social and Economic Research, wedoIT-solutions GmbH, 
and ECOPA (hereinafter collectively referred to as “the Consultant”) 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 objectives of this Study were to gather and analyse the evidence on the existing costs and 
benefits arising from the Directive, with the main focus on analysing the scale of the problems 
identified in the Ramboll evaluation.  The Study also assess the evolution of the problems if no 
further action at EU level is taken (dynamic baseline scenario) and the   economic, social and 
environmental impacts of the possible options to address the problems identified. 

Additionally,  the  Consultant  assisted  the  Commission  in  conducting  an  Open  Public 
Consultation  (OPC)  to  collect  stakeholders’  comments  and  feedback  on  the  issues  identified 
and the possible options for a revision of the Directive. 

The ISSG reviewed and approved the following documents  
-  all ISSG meetings' minutes 
-  questionnaires (OPC, Member State, economic operator) for the stakeholders' consultation 

30 

31 

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. 

70 

 
 
 
                                                 
inception report32 of the independent contractor's study 

- 
-  final report of the independent contractor's study 
-  Commission's Impact Assessment Report (this document) 

The chronology of the main events is as follow: 

26/01/2017 
  29/03/2017  
April 2017 
Apr – Jul 2017 

  04/07/2017 
Jul - Aug 
07/09/2017 
06/11/2017, 12/12/2017  

first ISSG meeting 
ISSG meeting on the inception report 
approval of the open public consultation (OPC) questionaire 
stakeholders' consultation, including OPC in all EU languages 
Presentation of the Progress Report to the ISSG 
ISSG review of the study's draft final report 
ISSG meeting on the study's draft final report 

ISSG meeting on Commission's Impact Assessment Report 

3.  Consultation of the RSB 

The Impact Assessment report was examined by the Regulatory Scrutiny Board on 24/01/2018.  

Overview table of the changes  
compared to the first version submitted to the Regulatory Scrutiny Board 

Board recommendation 

What has been done? 

Where? 

1.  The  report  does  not  adequately 
frame this initiative in the  context of 
the  evaluation  and  the  positions 
expressed by different stakeholders. 

Section 1 

information  on 

Further 
the 
REFIT  evaluation  of  Directive 
92/83/EEC  has  been  included 
throughout the report in order to 
address 
recommendation. 
Clarification on the scope of the 
initiative  has  been  added  to  the 
introduction and content section. 

this 

The  positions  expressed  by  the 
different  stakeholders  have  been 
further addressed in the opening 
sections  and  the  revised  Annex 
2,  which  provides  the  synopsis 
stakeholder 
the 
on 
report 
consultation. 

Sections  1,  2.1 
2 
and  Annex 
(synopsis report  – 
stakeholder 
consultation) 

2. The report does not systematically 
assess  the  overall  effects  of  the 
proposed  REFIT  measures  in  terms 
of  simplification  and  reduction  of 
administrative burden. 

A  dedicated  REFIT  section  in 
the  report  has  been  included  to 
systematically 
the 
effects of the options.  

analyse 

Section 8 

32  

Intermediate deliverable, describing the problems, options, methodology and approach of the study 

71 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
3.  The  composition  and  impacts  of 
the  different 
are  not 
adequately presented. 

options 

Further  clarification  regarding 
the  complexity  of  the  issues  at 
stake  has  been 
in 
section 2. 

included 

Section 2 

Section 5.1 

An  overview  of 
the  drivers, 
problems, objectives and options 
has  been  included  in  the  report 
in  order 
to  provide  greater 
clarity. This outlines the distinct 
to 
problems  and 
address these in different ways.  

the  need 

Further 
the 
clarification 
option section has been added to 
address this concern. 

in 

Section  5.2,  5.3, 
5.5 

information  on 

the 
Further 
impacts  of  the  different  options 
has been included in the report. 

Section 6 

4.    A  summary  presentation  of  the 
package  of  measures  considered  as 
the preferred option is missing and it 
is  unclear  why  alternative  packages 
are not considered. 

subsection 
additional 
An 
providing 
summary 
a 
presentation  of  the  packages  of 
the 
measures  considered  as 
been 
preferred 
included in the report. 

option 

has 

Section 7.5 

Section 5 

Further  clarification  has  been 
added  to  the  section  on  options 
to address the fact that due to the 
complexity of the issues at stake, 
alternative  options  are  in  some 
cases not possible.  

Further considerations and adjustment requirements of the Board 

Board recommendation 

What has been done? 

Where? 

should 

context 

(1) Justification of limited scope 
more 
The 
comprehensively  build  on  the  findings 
of  the  evaluation  and  show  how  the 
report addresses its recommendations. 
The  report  should  indicate  why  the 
proposed initiative is not part of a more 
exhaustive  revision  of  excise  duties  on 
alcohol  (e.g.  regarding  excise  duty 

Clarification on the scope of the 
initiative  has  been  added  to  the 
introduction and content section.  

Section 1 

The  report  is  not  part  of  an 
exhaustive  revision  of  excise 
duties on alcohol. This is due to 
the  limited  stakeholder  support 
for  amending  minimum  rates. 

Section 1 

72 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
It 

summarise 
should 
rates). 
stakeholders'  views  and  expectations 
(e.g.  through  references  to  Council 
conclusions or REFIT opinions). 
The  report  should  explain  how  this 
initiative  will  be  complemented  or 
modified by future health policy.  
All  of  the  above  should  deliver  a 
rationale  for  the  limited  scope  of  this 
initiative  and  a  better  correspondence 
definition, 
between 
stated 
stakeholders' 
objectives  (e.g.  on  health)  and  the 
proposed response. 

problem 
concerns, 

the 

(2) REFIT section 
A dedicated REFIT section in the report 
should  systematically  analyse  areas 
where the proposed measures introduce 
new  obligations  (e.g.  new  certificates 
for small producers) and those where it 
lifts some existing requirements.  
This  section  should  provide  a  clear 
conclusion  on the overall net reduction 
(or  creation)  of  administrative  burden 
stemming  from  the  proposed  package 
of measures and should describe who it 
the 
It  should 
will  affect. 
introduction of new requirements in the 
light 
than 
simplification  (e.g.  to  enhance  clarity 
and legal certainty).  
Finally,  this  section  should  also  better 

objectives 

justify 

other 

of 

Section 1 
Annex 2 
Annex 5 

Section  2.3,  2.4, 
2.5, Annex 9A 
Section 5 

Section 6 

clarification  has  been 
This 
included  in  section  1  of  the 
report. 

in 

consultation 
Annex 

A revised synopsis report on the 
is 
stakeholder 
included 
2. 
Clarifications  on  stakeholders' 
views and expectations have also 
been  included in  the report.  The 
Council  Conclusions  have  been 
added to the annexes.   

Additional  information  has  been 
added to the report to address the 
recommendations  of  the  REFIT 
evaluation of the Directive. 

The  report  does  not  include  any 
that  endanger  human 
options 
health and where appropriate we 
in 
include  public  health 
the 
impacts  of 
the 
section  on 
options.  Public  health  impacts 
are relevant only in the problem 
of  denatured  alcohol  and  low 
strength  alcohol.  The  modest 
relevance  of 
the  options  for 
public  health  is  inherent  in  the 
type of reform envisaged.  

A  dedicated  REFIT  section  in 
the  report  has  been  included  to 
the 
systematically 
effects of the options.  

analyse 

Section 8 

This section outlines the benefits 
of  this  proposals  in  terms  of 
reducing  unnecessary  costs  and 
burdens,  if  the  Directive  was 
functioning  better.  Stakeholders 
were not in a position to provide 
the  monetary 
estimates  of 
adminstrative 
of 
impacts 
burdens, 
their 
subjective options and anecdotal 
evidence was obtained.  

however 

The section includes a summary 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
delineate  the  scope  of  administrative 
burden  that  falls  in  the  remit  of  the 
proposed  initiative  and  distinguish  it 
from  obligations  that  emanate  from 
other  pieces  of  EU,  national  or  local 
regulations. 

(3) Packaging of proposed measures 
The report should clarify the packaging 
of  the  proposed  measures.  It  should 
better  highlight  choices  to  be  made 
between 
and 
distinguish  areas  where  there  is  no 
alternative  option.  The  report  should 
also  better  explain  how 
individual 
measures  combine  and  complement 
each other. 

different  measures 

table  of  the  expected  regulatory 
benefits of each option. 

refers 

section  also 

to 
The 
from  Directive 
obligations 
2008/118/EC, which sets out the 
rulesand  conditions  for  holding 
and  moving 
excise  goods, 
including  alcohol  and  alcoholic 
beverages.  

subsection 
additional 
An 
providing 
summary 
a 
presentation  of  the  packages  of 
the 
measures  considered  as 
preferred 
been 
included in the report. 

option 

has 

a 

report 

considers 

The 
the 
preferred options to be those that 
can achieve the necessary impact 
standalone  measure. 
as 
Complimentary  options  which 
do  not  work  in  isolation  are  not 
included 
standalone 
preferred options. 

the 

as 

Further  clarification  has  been 
added  to  the  section  on  options 
to address the fact that due to the 
complexity of the issues at stake, 
alternative  options  are  in  some 
cases not possible.  

the  problems, 

An  overview  of  the  intervention 
logic is included in the report to 
illustrate 
the 
drivers,  the  objectives  and  the 
corresponding  options  better. 
These  distinct  problems  and 
their  underlying  drivers  need  to 
be  addressed  in  different  ways 
and  this  is  reflected  preferred 
options.  
Further 
the 
impacts  of  the  different  options 
has been included in the report. 

information  on 

the 

into 

(4) Impact of options 
The  report  should  more  systematically 
account 
take 
different 
objectives  of 
initiative  when 
the 
assessing the impacts and effectiveness 
of the different options. It should better 
describe  how  each  measure  tackles 
different  problems  and  contributes  to 
different 
the 
(sometimes 
conflicting) 
objectives.  

achievement 

possibly 

of 

It should  also include a presentation of 

circumvention  of 
Preventing 
legislation is difficult to achieve, 

74 

Section 7.5 

Section 5 

Section 5  

Section 6 

Section 7.2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
and 

simplification 

trade-offs  (e.g. 
potential  risks  and 
between 
legal 
certainty).  For  instance,  reviewing  the 
classification  of  alcoholic  beverages 
appears  to  aim  both  at  tackling  abuses 
of the system by business operators and 
at  providing  enhanced  clarity  to  tax 
authorities.  The  report  should  better 
differentiate  the  performance  of  the 
proposed  measures  vis-à-vis  these  two 
objectives  and  should  convincingly 
demonstrate  why  a  new  classification 
would 
business 
operators  from  circumventing  the  new 
rules.  

actually 

prevent 

The scoring system  for  the comparison 
of  option  should  be 
revised  and 
complemented  to  make  sure  that  the 
assessment  matches  the  more  detailed 
comments  and  choice  of  preferred 
measures. 
(5) Comparison of options 
Since readers may place different levels 
of importance on various pros and cons 
of 
the  comparison  of 
individual 
options  should  not  add 
ratings  and  report  total  scores  as  a 
single figure. 

the  options, 

(6) Summary of preferred options 
The  report  should  include  a  summary 
description  of  the  preferred  option,  as 
well as a section grouping the ones that 
were  discarded  with  explanations  why 
each was dropped.  

in 

that 

result 

indicate 

The presentation of the preferred option 
the  choices 
should  clearly 
made 
this  specific 
combination  of  proposed  measures 
forming a coherent whole. In particular, 
the report should  clarify what were the 
this 
determining 
preferred option.  

to  select 

factors 

rules 

the  other 

for 
the  new 
however 
distinguishing  cider  and  perry 
within 
fermented 
beverages  category  is  preferred. 
avoid 
option  would 
This 
instituting  differences  in  the  tax 
category 
may 
unintentionally  exclude  some 
eligible  products,  erode  this  tax 
category 
terms  and 
legal 
increase  the  overall  complexity 
of the system.  

which 

in 

Section 7 

Section 7 

Section 7.5 

The  scoring  system  has  been 
revised  inline  and  reflects  the 
detailed comments and choice of 
preferred options. 

tables 

displaying 

the 
The 
comparison of options have been 
amended  to  take  account  of  this 
recommendation. The ratings are 
now  +  /  -  or  0  if  there  are  no 
pros/cons for the option. There is 
no total score for any option. 

subsection 
additional 
An 
providing 
summary 
a 
presentation  of  the  packages  of 
the 
measures  considered  as 
preferred 
been 
included in the report. 

option 

has 

Discarded  options  have  been 
included  under  the  cluster  of 
options  dealing  with  a  specific 
problem. 

Clarification  has  been  added  to 
the  section  on  how  the  options 
compared  clearly  indicating  the 
preferred 
the 
options 
reasoning for this. 

and 

Section 5.2, 5.3 

Section  7.1,  7.2, 
7.3, 7.4 

Section 7.5 

It  should  explain  the  implementation 
is 
requirements  and  describe  what 
likely  to  happen  once  all  measures  are 

additional 

The 
subsection 
outlining  the  summary  of  the 
preferred  packages  describes 

75 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
implemented. 

what is likely to happen once all 
measures are implemented. 

76 

 
 
 
 
 
 
 
ANNEX 2. 

SYNOPSIS REPORT – STAKEHOLDER CONSULTATION 

 1. Consultation strategy 

Three different types of consultation activities took place, each of them tailored to the targeted 
type of stakeholder: 

1. Consultation of the Indirect Tax Expert Group and Fiscalis Project Group  

2. Targeted questionnaires and in-depth-interviews of key stakeholders 

3. Open Public Consultation 

Directive  92/83/EEC  has  direct  effect  on  public  authorities  in  Member  States,  economic 
operators  and  their  related  organisations/associations  and  NGOs  active  in  the  health  area.  The 
stakeholder groups directly affected by the Directive were consulted by targeted questionnaires, 
followed  up  by  telephone  and  in-depth  interviews  as  appropriate.  Moreover,  for  these  groups 
round  table  meetings  were  organised  in  2017  covering  the  same  topics  as  in  the  in-depth 
interviews.  All  stakeholders,  both  directly  and  indirectly  affected,  including  EU  citizen,  were 
consulted  by  the  Open  Public  Consultation.  Due  to  the  more  indirect  relationship  of  the 
Directive  and  the  fact  the  Directive  allows  Member  States  flexibility  in  implementation,  the 
interest of the general public is often low. The influence of the general public on the Directive is 
also quite low. 

The aim of this in-depth consultation programme was to get a better understanding of the overall 
functioning of the Directive, the necessity of an intervention and the details of the issues at stake. 
In  addition,  the  objective  of  the  consultation  activities  was  to  gather  the  views  of  the  main 
stakeholders on a set of possible options for the revision of the Directive. 

2. Indirect Tax Expert Group and Fiscalis Project Group 

Member States have been consulted through the Indirect Tax Expert Group and in particular on 
denatured alcohol in the Fiscalis Project Group.  

The  Fiscalis  Project  Group  (FPG)  was  created  to  explore  the  possibility  of  applying  common 
denaturing  procedures  for  CDA.  Between  2009  and  2016,  the  Fiscalis  Project  Group  on  the 
Eurodenaturant (phases 1 and 2) met a total of 25 days (including one 3-day seminar), with an 
average of 25 MS and 3 Commission participants, which equates to a total of at least 700 days 
of  staff  time.  After  the  first  phase  of  the  project,  the  FPG  proposed  a  formulation  commonly 
referred  to  as  the  '3-3-1'  Eurodenaturant  formulation,  which  was  adopted  on  1  July  2013  by 
Commission  Regulation  (EU)  No.  162/2013.  However,  most  MS  chose  to  recognise  this 
formulation  in  addition  to,  rather  than  instead  of,  their  national  formulations.  Furthermore  the 
uptake  of  the  '3-3-1'  Eurodenaturant  formulation  was  limited  as  many  economic  operators 
indicated  that  it  was  too  costly  to  produce  and  the  availability  of  one  of  the  elements  was 
problematic.  In response to these criticisms, a revised formulation was developed in the second 
phase  of  the  FPG.  This  formulation,  commonly  referred  to  as  the  '1-1-1'  Eurodenaturant 
formulation was adopted in 2017 and is currently used by 25 Member States.  

Exploratory work on a harmonised list of PDA formulations has also been carried out within the 
Fiscalis  Project  Group  for  certain  sectors,  namely  (1)  perfumes,  cosmetics  and  (personal) 
hygiene  products,  and  (2)  screen  wash,  de-icer  and  anti-freeze.  The  discussions  regarding  the 
former  turned  out  to  be  particularly  difficult,  mainly  because  the  national  approaches  are 

77 

 
 
 
 
currently  so  different,  with  some  MS  authorising  denaturation  with  ingredients  of  the  final 
product  (such as  essential oils)  in  specific cases, while  others  have  a strictly  defined  list  (or a 
single formulation) that applies to all producers equally. 

3. Targeted questionnaires 

Overall, 161 stakeholders were consulted, for an estimated total of over 215 individual participants 
(many  interviews  were  attended  by  multiple  participants).  The  external  contractor  conducted 
interviews in the six countries selected for core fieldwork (DE, FR, IT, PL, RO, UK), as well as in 
the other six MS selected for the thematic research on specific issues (AT, BE, CZ, ES, FI, NL). 
The geographical distribution of interviews is provided in Table 1 below. 

of 

Country of origin 

Table 1 – Breakdown of in-depth interviews, by type of respondents and country of origin     
of 
No. 
Respondent Type 
stakeholders 
interviewed  
5 
33 
21 
7 
5 
112* 
30 
34 
33 
30 
32 
5 
7 
4 

European Commission staff 
MS Competent Authorities 
-  Tax/customs authorities 
-  Public Health authorities 
-  Other (Agriculture authorities, etc.) 
Economic operators and trade associations 
-  Beer sector 
-  Wine sector 
-  Cider and OFB sector 
-  Spirits and liqueurs sector 
-  Industrial alcohol sector 
-  Other (e.g. home brewers association, etc.) 
Public health NGOs 
Others (e.g. experts etc.) 

France 
Germany 
Italy 
Poland 
Romania 
United Kingdom 
Austria 
Belgium 
Czech Republic 
Finland 
Netherlands 
Spain 
Other MS** 
EU level 

26 
15 
19 
17 
10 
14 
6 
8 
6 
9 
9 
4 
2 
16 

No. 
stakeholders 
interviewed 

Grand total 
Notes:  (*)  the  total  for  this  category  does  not  add  up  to  the  number  of  interviews  per  sector,  since  various 
interviewees operate in more than one sector; (**) from MS not included in the selected sample. 

Grand total 

161 

161 

All  interviews  were  based  on  the  checklists  for  discussion  that  were  developed  in  the  inception 
phase of the external study and further refined and consolidated during the data collection phase. 
The results of the targeted consultations are discussed in detail below. 

3.1. Results of the in-depth-interviews 

Classification of alcoholic beverages  

 

In  all  interviews  with  stakeholders  it  was  confirmed  that  ‘borderline’  products  are 
generally  found  in  the  ‘value’  segment  of  the  market,  where  tax  optimisation  is  more 
important than for premium brands. 

  Nearly all the officers interviewed on this point affirmed the uncertainty with classification 
of other fermented beverages due to the current definitions and the fact that the distinction 
between CN 2206 and CN 2208 remains unclear still.   
 The customs administrations interviewed were generally not in the position to estimate the 
frequency  of  problematic  products  cases,  and  the  administrative  burden  attributable  to 
these dossiers, 

 

  A significant share of stakeholders met during the fieldwork, tax authorities in particular, 
would be in favour of clearer common criteria for the identification of products that have 
lost  their  essential  fermented  character,  than  those  laid  down  in  CNEN  note  2206  00, 
which reportedly leave the margin for subjective interpretation too ample. 

Reduced rates 

 

In terms of administrative burden for economic operators and enforcement costs for public 
authorities, the fieldwork confirmed that the reduced rates for small brewers do not require 
unnecessary efforts, from neither companies nor customs. Enforcement costs with respect 
78 

 
 
 
 
 
 
 
 
 
 
to domestic producers were considered to be  minimal by all tax and customs authorities 
interviewed.  

  Economic  operators  consider  that  the  provision  supports  the  competitiveness  of  small 
brewers, and that the tax discount does benefit small operators, rather than being passed 
through the value chain. 

  Very few tax authorities expressed support for the extension of reduced rates to small wine 
producers, mentioning that they already enjoy significant advantages, such as the zero rate 
and the simplifications provided by Directive 2008/118/EC. 

  Tax authorities either welcomed or did not oppose the possibility of granting reduced rates 

to small cider makers. 

Excise duty exemptions for denatured alcohol 

  The  majority  of  stakeholders  consulted  (including  both  national  authorities  and 
economic  operators  felt  the  current  rules  at  EU  level,  although  complex,  were  fit  for 
purpose,  and  there  is  no  need  for  any  fundamental  changes  to  the  current  framework. 
Nonetheless, problems can and do occur due to (1) an incomplete / inconsistent mutual 
recognition of CDA, (2) the proliferation of national regulatory approaches to PDA, and 
(3) divergent interpretations of certain terms related to PDA. 

  The interviews conducted  as part of the study confirmed that the vast majority of both 
national authorities and economic operators agreed that there are good reasons to allow 
MS to define their own rules for PDA. 

  The interviews with economic operators conducted revealed a mixed picture as regards 
cross-border  trade  in  PDA.  While  most  interviewees  acknowledged  the  fact  that  the 
different procedures and regimes in each MS can and do make cross-border trade more 
difficult,  none  of  the  interviewees  felt  this  had  affected  them  in  a  significant  way,  or 
were able to point to instances where they had incurred unforeseen costs. 

Calculation of excise duties on sweetened or flavoured beer using the Plato method 

  All stakeholders interviewed confirmed that the EU market for sweetened/flavoured beer 

is relatively small, but growing.  

  MS  currently  using  the  Plato  method  to  calculate  the  excise  duty  having  adopted  an 
approach (not) taking into account the added sweeteners and flavours after fermentation 
are unlikely to change approach unless binding changes are made in the Directive. 

4. Overview of the results of the Open Public Consultation (OPC) 

The OPC was carried out in the framework of the Assignment.33 The English version of the OPC 
was launched on 18 April 2017, followed three weeks later by the other versions translated into all 
the EU official languages. It remained open until 11 July 2017, for a total of 12 weeks.  

a) Questions 
The  OPC  questionnaire  consisted  of  58  questions,  divided  into  six  sections,  including  one 
introductory section about the respondent’s profile, four thematic sections, and a final section for 
the upload of additional documents.  

33  

https://ec.europa.eu/taxation_customs/consultations-get-involved/customs-consultations/public-consultation-structures-
excise-duties-applied-alcohol-and-alcoholic-beverages_en 

79 

 
 
 
 
 
 
 
 
                                                 
To  take  the  disparity  of  respondents’  background  into  account,  each  thematic  section  included 
general  questions  suitable  for  all  type  of  respondents,  and  more  specific  questions  requiring  a 
more in-depth knowledge of (or specific interest in) the technical functioning of Directive 92/83.  

b) Profile of the participants 

  The OPC attracted a total of 16634 responses; a somewhat low number possibly due to 
the  fact  that  many  companies  submitted  a  joint  reply  to  the  OPC  via  their  EU-level 
industry associations, as emerged during the fieldwork of the Study. Respondents from 
21  EU  MS  participated  in  the  OPC.  France  and  Austria  contributed  relatively  greatly, 
with 30 and 26 respondents respectively. Other significant countries in terms of absolute 
number  of  contributions  were  the  United  Kingdom,  Italy  and  Poland.  Moreover,  21 
responses were collected from EU-level or multinational entities.35  

  The majority of respondents were economic operators (62) and industry associations (56) 
and  other  similar  entities.36  In  addition,  37  private  individuals  took  part  in  the  survey, 
while  the participation of the other respondent  groups was more limited:  only 2 public 
health  NGOs,  3  public  authorities  and  6  miscellaneous  respondents.37  For  this  reason, 
throughout  the  rest  of  this  annex,  these  respondents  have  been  grouped  together  into  a 
single “other” category.  

  The  majority  of  industry  respondents  (including  both  economic  operators  and  industry 
associations and other similar entities) were brewers (40 out of 118, i.e. over one third), 
followed  by  those  involved  in  the  production  of  other  fermented  beverages.  The  other 
product  categories  (wine,  intermediate  products,  ethyl  alcohol  and  industrial  alcohol) 
were also fairly represented, with the participation of at least 20 stakeholders per area of 
activity (see Table 2). 

  As far as the size of economic operators is concerned, the majority of respondents were 
SMEs  (including  micro,  small  and  medium  size  companies,  for  a  total  of  34).  In 
addition,  22  large  companies  with  more  than  250  employees  also  took  part  in  the 
questionnaire. 

Table 2: Overview of respondents to the 2017 OPC – breakdown by category 

34   The total number of responses initially reached 171. However, after a preliminary analysis three entirely blank responses 

and two duplicates were discarded. 

35   A number of EU-level organisations had improperly classified themselves as being based in Belgium and were therefore 

reclassified. 

36   Note that a number of companies had erroneously classified themselves as “industry associations” and therefore had to be 
reclassified as “economic operators”. Moreover, certain entities  – self-declared as NGOs but having specific interests in 
certain products and sectors – were included in the “industry associations” group, which was for this reason renamed as 
“industry associations and other similar entities”. 

37   The  6  miscellaneous  respondents  include  a  trade  association  of farmers,  an  advocacy firm, an alembics manufacturer, a 

canning company, a private consultant for farmers and a consulting company for the beverage industry. 

80 

 
 
 
  
                                                 
31 

20 

23 

25 

26 

33 

40 

45

40

35

30

25

20

15

10

5

0

B

W

OFB

Int

Eth

IA

Oth

Legend:  B:  production  of  beer;  W:  production  of  wine;  OFB:  production  of  other  fermented  beverages;  Int:  production  of 
intermediate  products;  Eth:  production  of  ethyl  alcohol;  IA:  production  or  end-use  of  alcohol  for  industrial  uses;  Oth:  other 
(e.g. production of fermentable raw materials, distribution and retail of alcoholic beverages). 

Note:  the  sum  of  respondents  by  area  of  activity  exceeds  the  total  number  of  economic  operators/industry  associations  since 
many of them operate in more than one area of activity. 

c) OPC results per thematic section 

The section that attracted the greatest interest was that on the reduced rates or exemptions for 
certain  producers  and  types  of  alcoholic  beverages,  which  totalled  a  number  of  responses 
ranging  from  68  to  132.  Table  3  below  provides  a  more  detailed  overview  of  the  number  of 
responses per thematic section  

Table 3: Overview of respondents to the 2017 OPC – Number of respondents by sub-section 
(not including “Don’t know” answers) 

Classification 

Reduced rates or 
exemptions 

Denatured 
alcohol 

Plato method 

Minimum and maximum 
number of respondents 

51 - 131 

68 - 132 

16 - 82 

50 - 60 

Note:  The  number  of  respondents  across  different  questions  within  the  same  section  varies,  therefore  the  range  between  the 
question with the lowest number of responses and that with the highest number is indicated. 

Section 1: Classification of alcoholic beverages 

All industry stakeholders tend to agree that there is no need to reconsider the tax treatment of 
RTDs,  beer-mixes,  fermented-base  liqueurs  and  high  strength  fermented  beverages,  with  the 
only exception of beer producers who – while they see no issue with beer-mixes – consider that 
the treatment of the other products may require a partial revision. To the contrary, the majority 
of private individuals and of respondents falling into the residual ‘other’ category believe the tax 
treatment of the products, and especially RTDs, needs to be reconsidered.  

A clear majority of the industry opposes a different treatment of new mixed drinks from more 
traditional  alcoholic  beverages,  whereas  private  individuals  tend  to  agree  with  the  principle. 
Similarly, the industry opposes special taxes on products intended for the youth, while private 
individuals  and  the  ‘other’  respondent  category  are  in  favour.  Unsurprisingly,  the  taxation  of 
products that are equivalent for consumers but based on fermented or distilled alcohol divides 
the industry, with producers of fermented beverages (beer, wine and OFB) in favour of different 
levels  of  taxation  depending  on  the  base  (fermented  or  distilled),  and  spirits  producers 
advocating for an equal treatment, regardless of the base. To the contrary, all respondent groups 

81 

 
 
 
 
agree that wines and beers using alcohol as flavour-carrier should not be taxed more heavily for 
this. 

While  the  above  clearly  reflects  the  position  of  the  industry,  preferring  the  status  quo  and 
expecting  negative  impacts  of  a  revision  of  the  classification  of  the  definitions  of alcohol and 
alcoholic beverages, the actual impact assessment shows positive impacts of a revision of this 
area. The position of industry in this specific section is in line with the overall position of the 
industry – preference for the status quo because the results of the revision are unknown for this 
group, especially after having the same legislation for the last 26 years. In addition, it is clear 
when  the  respondents  are  distinguished  by  interest  in  a  product  group,  that  they  are  only  in 
favour of options which would benefit their products, while they are against other options, even 
if these options have no impact on their product range. The option to add a subcategory for all 
traditional OFB products (i.e. cider and perry etc.) to the current OFB category 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. 

Section 2: Reduced rates  

Reduced rates for small producers 

While private individuals and the ‘other’ respondent category  tend to be  strongly in  favour of 
reduced rates for small producers of all alcoholic beverages, industry stakeholders present more 
varied  positions.  Those  involved  in  the  production  of  beer,  for  instance,  strongly  agree  with 
reduced rates for small breweries. To the contrary, those involved in the production of wine and 
intermediate  products  strongly  disagree  with  reduced  rates  for  small  wineries  and  small 
producers of intermediate products.  

According  to  stakeholders  involved  in  the  beer  sector,  ensuring  that  reduced  rates  are  applied 
also on products from other  MS (or third countries) is  only a  marginal  issue. To the  contrary, 
approximately 50%  of those involved in  the production  of spirits consider it a major  issue. In 
addition,  determining  the  independence  of  a  company  appears  to  be  a  moderate,  if  not  major 
issue for both beer and spirits producers. All respondent groups expressed agreement (or at least 
a  neutral  stance)  with  the  various  options  aiming  at  clarifying  the  rules  surrounding  small 
producers  (cross-border  recognition,  certification  of  independence)  and  with  the  ‘no-change’ 
option. 

Industry stakeholders involved in the production of wine, OFB and intermediate products are of 
the opinion that the introduction of optional reduced rates for small producers in their areas of 
activity  would  not  reach  the  goal  of  increasing  small  producers’  competitiveness.  To  the 
contrary, they fear that this would be the first step for the introduction or the increase of taxes on 
big producers. The huge majority of stakeholders active in the beer sector maintain that reduced 
rates are likely, if not very likely, to enhance the competitiveness of small producers, but they 
agree with the rest of the industry that it may be a tool for MS to introduce/increase taxes for big 
producers.  

Question #33 - Please express your opinion on the following possible approaches to extend the 
application  of  reduced  rates  to  small  producers  of  alcoholic  beverages  that  are  not  currently 
covered and/or to clarify the implementation rules 

82 

 
 
 
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

8 

7 

7 
2 

3 

14 

2 

10 

6 

3 

33 

6 

2 

4 

1 
Priv Oth

W Ind

Introduce in the Directive the
possibility of reduced excise
duty rates for wine

3 

6 

3 

1 

10 

8 

12 

14 

2 

15 

9 

6 

9 

3 

2 

2 

2 
1 
Priv Oth

OFB Ind

Introduce in the Directive the
possibility of applying reduced
excise duty rates for
fermented beverages other
than wine and beer (e.g.
cider, perry, mead)

1 
1 
1 

5 

9 

13 

23 

1 

18 

4 

5 

9 

5 

2 

2 

3 

2 

14 

4 

2 

20 

10 

2 

3 

7 

7 

1 

1 

3 

8 

1 
1 

Int

Ind

Priv Oth

B W OFB

Int

6 

2 

4 

5 

14 

5 

7 

2 

4 

3 

1 
1 
Eth Priv Oth

Introduce in the Directive the
possibility of reduced excise
duty rates for intermediate
products (e.g. sherry, port)

Clarify the rules on cross-border
recognition of small producers

1 

3 

8 

1 
1 

3 

7 

7 

1 

7 

3 

3 

3 

14 

6 

3 

3 

7 

3 

2 

4 

4 

6 

6 

4 
2 

9 

18 

1 

3 

1 

2 

7 

6 

8 

3 

2 

12 

4 

2 

21 

10 

3 

B

2 

2 

1 

2 

6 

14 

8 

10 

7 

6 

8 

3 

3 

9 

4 

5 

6 

6 

1 

7 

2 

6 

2 

7 

B

2 

3 

5 

4 

W OFB

Int

Eth

Priv Oth

Eth

Ind

Priv Oth

W OFB

Int

Eth

Priv Oth

Clarify the rules to establish when a producer can be 
treated as an ‘independent’ entity 

To raise the threshold below 
which distilleries can be 
considered as ‘small’ 

No change of the Directive, but the issuance of
guidelines on the implementation of the rules
on reduced rate for small producers

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

Legend: B: industry stakeholders with an interest in the beer sector; W: industry stakeholders with an interest in the wine sector; OFB: industry 
stakeholders  with  an  interest  in  the  other  fermented  beverages  sector;  Int:  industry  stakeholders  with  an  interest  in  the  intermediate  products 
sector; Eth: industry stakeholders with an interest in the ethyl alcohol sector; Ind: rest of the industry (not included in the previous category); 
Priv: private individuals; Oth: Other (public health NGOs, public authorities, etc.). 

Note:  industry  stakeholders  with  an  interest  in  the  production  or  end-use  of  industrial  alcohol  have  been  included  in  the  “Ind”  category, 
whenever present. If not present, they have been included in the residual “Oth” category. 

In line with the view of the majority of the stakeholders, the preferred options are to clarify the 
rules when a producer can be treated as 'economically and legally independent' and to introduce 
an  optional  reduced  rate  for  small  cider  producers  to  improve  their  competitiveness.  As 
presented in the body of  the  IA report, extending the optional reduced  rate to  other producers 
was, besides undesired, also likely to have limited if any impacts.  

Reduced rates for low-strength beverages 

83 

 
 
 
 
As  far  as  wine,  intermediate  products  and  ethyl  alcohol  are  concerned,  the  majority  of  the 
industry is against reduced rates for low-strength products. More favourable positions are shown 
for  the  other  products,  especially  beer:  over  80%  of  stakeholders  in  the  beer  industry  are 
strongly  in  favour  of  reduced  rates  for  low-strength  beer.  Private  individuals  and  other 
respondents are generally in favour of reduced rates. 

The policy option of raising the threshold of low-strength alcoholic beverages – be it moderately 
or significantly – was faced with strong disagreement by the majority of all respondent groups. 
The  only  exception  was  represented  by  the  beer  sector,  where  almost  80%  of  brewers  would 
welcome a new threshold for beer set at 3.5% ABV. Opinions on the ‘no-change’ policy option 
were more varied, with substantial shares of neutral respondents. 

Question # 39 - Please express your opinion on the following possible approaches to encourage 
the use of optional reduced rates for lower strength alcoholic beverages. 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1 

1 

1 

2 

2 

10 

4 

2 

4 

4 

1 

4 

6 

3 

27 

12 

4 

4 

7 

2 

5 

13 

6 

2 

2 

3 

2 

2 

5 

5 

6 

4 

12 

32 

1 

2 

1 

3 

5 

3 

4 

6 

6 

1 

1 

2 

4 

3 

4 

5 

4 

4 

21 

3 

1 

10 

12 

15 

8 

2 

2 

2 

4 

1 

4 

6 

2 
4 

9 

7 

2 

1 

14 

23 

6 

1 

2 

7 

15 

4 
1 

6 

1 

13 

23 

8 

1 
B

Ind Priv Oth

W Ind Priv Oth

W Ind Priv Oth

OFB Ind Priv Oth

OFB Ind Priv Oth

To raise the threshold of
low-strength beer from
2.8% to 3.5% ABV

To moderately raise the
threshold of low-strength
wine (currently 8.5% ABV)

To significantly raise the
threshold of low-strength
wine (currently 8.5% ABV)

To moderately raise the
threshold of low-strength
OFB, like cider and perry
(currently 8.5% ABV)

To significantly raise
the threshold of low-
strength OFB, like
cider and perry
(currently 8.5% ABV)

1 
1 
1 

3 
3 

11 

22 

12 

4 

4 

4 

4 

2 

2 

13  7 

2 

4 
2 

9 

2 
1 
1 

13 

24 

12 

2 

6 

3 

4 

5 

1 

1 

1 

2 

3 
4 

6 

2 

3 

18 

11 

3 

4 

4 

5 

1 

1 

1 

2 

20 

7 

2 

1 
1 

3 

3 
4 

6 

7 

11 

30 

3 

5 

1 

1 

5 

2 

4 

1 

7 

2 

1 
2 

4 

9 

1 

20 

1 

6 

4 

2 

12 

1 

4 

7 

6 

4 

5 

2 

2 

5 

6 

2 

4 

1 

8 

3 

3 

5 

2 

Int

Ind Priv Oth

Int

Ind Priv Oth

Eth Ind Priv Oth

Eth Ind Priv Oth

B W OFB Int Eth Priv Oth

To moderately raise the
threshold of low-
strength intermediate
products, like sherry and
port (currently 15%
ABV)

To significantly raise the
threshold of low-
strength intermediate
products, like sherry and
port (currently 15%
ABV)

To moderately raise the
threshold of low-
strength ethyl alcohol,
i.e. spirits  (currently
10% ABV)

To significantly raise the
threshold of low-
strength ethyl alcohol,
i.e. spirits  (currently
10% ABV)

No change of the Directive, but
the issuance of guidelines on the
implementation of reduced rate
for lower-strength alcoholic
beverages, including a clarification
of the policy objectives

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

84 

 
 
 
 
Legend: B: industry stakeholders with an interest in the beer sector; W: industry stakeholders with an interest in the wine sector; OFB: industry 
stakeholders  with  an  interest  in  the  other  fermented  beverages  sector;  Int:  industry  stakeholders  with  an  interest  in  the  intermediate  products 
sector; Eth: industry stakeholders with an interest in the ethyl alcohol sector; Ind: rest of the industry (not included in the previous category); 
Priv: private individuals; Oth: Other (public health NGOs, public authorities, etc.). 

Note: industry stakeholders with an interest in the production or end-use of industrial alcohol have been included in the “Ind” category whenever 
present. If not present, they have been included in the residual “Oth” category. 

As far as  the likely results of reduced  rates  for low-strength products  are concerned,  the huge 
majority of stakeholders involved in the production of beer (and, to a lesser degree, those in the 
production  of  OFB)  agree  that  there  would  be  greater  incentives  for  product  innovation,  with 
more  choice  for  consumers.  Moreover,  both  small  and  big  producers  would  benefit,  despite  a 
reduction of alcohol consumption per  capita. The rest  of the industry, however,  tend to  be far 
more  sceptical  on  the  possible  benefits  of  reduced  rates  for  low-strength  products. 
Unsurprisingly, all respondents – including private individuals and the ‘other’ category, agreed 
that  more  affordable  low-strength  products  would  not  increase  the  overall  consumption  of 
alcohol per capita. 

The  preferred  option  is  to  increase  the  threshold  for  low-strength  beer  from  2.8  %  to  3.5  % 
ABV.  This  is  in  line  with  the  preference  of  the  beer  industry,  while  the  rest  of  the  industry 
disagrees  with  this  approach.  Similar  to  the  situation  as  described  under  section  1,  it  is  clear 
when  the  respondents  are  distinguished  by  interest  in  a  product  group,  that  they  are  only  in 
favour of options which would benefit their products, while they are against other options, even 
if these options have no impact on their product range. 

Section 3: Excise duty exemptions for denatured alcohol 

Completely Denatured alcohol 

The huge majority of all respondents – including those involved in the industrial alcohol sector 
–  stated  that  in  the  past  10  years  there  were  no  or  very  few  instances  of  tax  frauds  involving 
alcohol sold as potable, even though designated as industrial alcohol. 

Over 80% of the industrial alcohol industry, and to a lesser degree also the rest of the industry, 
agreed  that  the  current  legal  framework  ensured  fair  competition  and  flexibility  for  users  of 
denatured  alcohol,  facilitating  intra-EU  trade  and  helping  to  fight  fraud.  Private  individuals 
expressed a somewhat more sceptical opinion. The industrial alcohol industry maintains that the 
current  system  is  effective  and  appropriate.  The  rest  of  the  industry  shared  the  same  positive 
view,  with  some  respondents  suggesting  that  the  EU  should  provide  some  guidance  for  the 
interpretation of the rules. The industrial alcohol industry strongly believes that the distinction 
between ‘completely denatured’ and ‘denatured’ alcohol is useful and well-defined. At the same 
time, however, it is of the opinion that the implications of the two categories may not be entirely 
clear and it is not against the possibility of changing the rules for ‘denatured’ alcohol.  

The  preferred  option  to  codify  the  existing  regulation  is  supported  by  the  majority  of 
stakeholders. The current practice is by stakeholders reported as working well and codifying this 
practice is expected to reduce any remaining trade barriers and distortions and consolidates MS 
desires for a harmonised solution for CDA into a legal text. 

Partially denatured alcohol 

In general, a limited number of responses were received on the questions related to PDA.  The 
issues  that  received  greater  attention  from  the  industry  were:  (i)  the  additional  costs  and 
administrative burdens to ensure that alcohol denatured using a formulation accepted in one MS 
is  also  recognised  in  another  Member  State,  and  (ii)  possible  different  interpretations  on  the 

85 

 
 
meaning  of  “used  for  the  manufacture  of”.  Both  issues  however  were  described  as  quite  rare, 
having happened only once or twice. 

Industrial  alcohol  stakeholders  strongly  agreed  with  the  fact  that  MS  only  authorise  robust 
methods for partial denaturation and that they also effectively supervise the production, use and 
movement of partly denatured alcohol.  

The industry of denatured  alcohol  expressed a strong disagreement with  all the policy options 
that  may  limit  the  allowed  formulations  for  the  denaturation  of  alcohol.  Moreover,  they  are 
against a strict interpretation of Art. 27.1(b). To the contrary, they are strongly in favour of a full 
mutual recognition, supported by exchanges between public authorities of different MS to better 
understand  each  other’s  approaches.  All  the  other  respondents  –  including  the  rest  of  the 
industry,  private  individual  and  the  miscellaneous  ‘other’  category  –  expressed  more  mixed 
views  on  the  proposed  policy  options.  As  in  the  previous  cases,  however,  the  number  of 
responses from each respondent category is below 10 and cannot be therefore considered truly 
representative. 

86 

 
 
 
Question #53 - Please express your opinion on the following possible approaches to address the 
problems with the exemption of denatured alcohol. 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

3 

13 

1 

8 

3 

3 

1 

2 

1 

3 

1 

1 

1 

1 

1 

IA

Ind

Priv

Oth

22 

1 
2 

IA

4 

3 

2 

3 

1 

2 

3 

2 

5 

4 

21 

1 

1 

1 

1 

1 

1 

1 

3 

3 
1 

19 

1 

1 

1 

5 

3 

2 

2 

1 

1 

Ind

Priv

Oth

IA

Ind

Priv

Oth

IA

Ind

Priv

Oth

Agree on the “Euro” denaturant (in 
whichever concentration) as the only 
authorised formulation under article 
27.1 (a), and the eventual elimination of 
all national procedures 

Insist on full mutual recognition of
completely denatured alcohol, to
ensure that all Member States recognise
all procedures notified by all Member
States, irrespectively of where the
alcohol was produced / denatured

Accept limited mutual recognition of
completely denatured alcohol, meaning
that each Member State is only obliged
to recognise alcohol denatured using its
own national method(s) (which may
include the "Euro" denaturant)

Develop a common list of
formulations that are
authorised for denatured
alcohol under 27.1 (b) across all
Member States, distinguishing
between different end-uses /
sectors

1 
1 

24 

1 

3 

1 

1 

3 

2 

1 

2 

1 

1 

1 

2 
1 

23 

4 

2 

2 

2 

4 

1 

1 

IA

Ind

Priv Oth

IA

Ind

Priv Oth

22 

1 
2 

IA

1 

2 

1 

1 

1 

1 

1 

5 

2 

1 

2 

3 

2 

2 

4 

1 

1 

4 

1 

1 

1 

1 
2 
1 

22 

1 

2 

3 

2 

3 

1 

2 

2 

1 

Ind

Priv Oth

IA

Ind

Priv Oth

IA

Ind

Priv Oth

Clarify that the terms “used for 
the manufacture of” in article 
27.1 (b) only refers to the direct 
use, and does not include 
indirect uses such as cleaning, 
disinfection or other adjacent 
activities 

Clarify that the terms “any 
product not for human 
consumption” in article 27.1 (b) 
requires that the product in 
question is a recognisable 
finished product, and held out 
for sale as such 

Fund capacity / confidence 
building measures (e.g. training, 
exchanges, visits) between 
national tax and/or customs 
authorities to enhance their 
understanding of each others’ 
approaches to supervising the 
production and movement of 
denatured alcohol 

Define conditions for the
Member States to apply Articles
30 and 31 of Directive
2008/118/EC for the movement
of products of low fiscal risk to
certain types of denatured
alcohol

Depart from the current 
distinction between 
“completely denatured” 
and (partly) “denatured” 
alcohol; and instead 
distinguish between 
different end uses (e.g.: 
(1) sale to the public; (2) 
industrial applications; 
(3) use in biofuels) 

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

The preferred option to clarify that ''any product not for human consumption'' makes reference 
to  a  'recognisable  finished  product'  /  'finished  product'  is  not  supported by  the  majority  of  the 
industry involved in the production or end-use of alcohol for industrial uses. It should be noted, 
however, that the reason this area is under review, is to limit fraud and the way Member States 
authorities'  can  combat  and  detect  fraud  in  this  area.  This  preferred  option  is  the  only  way  to 

87 

 
 
 
provide  MS  with  flexibility  for  the  various  product  groups  using  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.  

The different national approaches towards PDA which are currently in place hamper the smaller 
businesses in cross border trade or even to enter the market in general, because of the investment 
required. This situation is in some way 'protecting' the current operators on the market, which is 
undesired  from  an  internal  market  and  competition  perspective.  Unsurprisingly,  the  current 
operators,  managing  to  deal  with  all  difficulties  of  understanding  and  complying  with  the 
different frameworks and costs, desire the status quo. The functioning of the internal market and 
the  fight  against  fraud  have  been  given  more  weight  than  to  ease  the  way  of  operating  of  the 
current industry, hence the choice for an option which does not correspond to the view of the 
industry involved in the production or end-use of alcohol for industrial uses. 

Section 4: Calculation of excise duties on sweetened or flavoured beer using the Plato method 

The majority of respondents, including those involved in the production of beer, believe that the 
term “finished product” in Art.3.1 should be interpreted as the end product, after the addition of 
sweeteners  and  flavourings.  It  is  worth  noting,  however,  that  big  beer  producers  and  many 
associations  of  breweries  decided  not  to  answer  the  question,  clarifying  their  position  in  the 
additional  comments.  They  explained  that,  while  the  Directive  makes  reference  to  the  Plato 
method, it does not clearly define how to measure the Plato degree. For this reason, they suggest 
applying  the  common  and  ‘everyday’  understanding  of  the  brewing  industry  relying  on  the 
Balling equations, which does not consider sweeteners and flavourings added after fermentation. 

While private individuals would be in favour of a revision of Article 3.1 to clarify the meaning 
of finished product, the beer industry tends to disagree. The rest of the industry, whose response 
rate was rather low, expressed varied positions on the issue. To the contrary, the majority of the 
industry – both involved and not involved in the production of beer – agreed or strongly agreed 
with the ‘no-change’ policy option, with guidance on the ‘correct’ approach to measure the Plato 
degree. 

Question #56 - Please express your opinion on the following possible approaches to the issue of 
excise duty applicable to sweetened or flavoured beer measured by degree Plato. 

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

9 

3 
2 

16 

2 

B

3 

2 

2 

5 

2 

9 

4 

1 

Ind

Priv

Oth

2 

2 

1 

3 

5 

1 

7 

2 

2 

1 

Ind

Priv

Oth

20 

3 

6 

2 
2 

B

Clarify article 3(1) of the Directive, with respect to the 
interpretation of “finished products” definition   

No change to the Directive, but  guidance on the 
‘correct’ approach to measure degree Plato of 
sweetened/flavoured beer 

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

Legend: B: industry stakeholders with an interest in the beer sector; Ind: rest of the industry (not included in the previous category); Priv: private 
individuals; Oth: Other (public health NGOs, public authorities, etc.). 

88 

 
 
 
The  preferred  option  to  clarify  the  calculation  of  excise  duty  on  sweetened  or  flavoured  beer 
using the Plato method is to amend Article 3 of the Directive. This is the only option to provide 
legal  clarity  and  ensure  an  equal  approach  of  the  calculation  of  excise  duty  using  the  Plato 
method  across  MS.  To  avoid  disrupting  the  functioning  of  the  internal  market  as  much  as 
possible, the preferred option is to codify the current practice in the majority of MS using the 
Plato method. 

5. REFIT Platform opinion 

For completeness, it is worth summarising the main points of a recently issued REFIT Platform 
Opinion  that  addressed  some  of  the  present  issues38.  The  Opinion  concerned  the  common 
interpretation of EU laws on Wine and Spirits. 

The Stakeholder group recommended the Commission to reduce the room for interpretation in the 
Directives  on  wine  and  spirits  by  issuing  a  common  threshold  on  fermented  alcohol.  The 
Stakeholder  group  further  suggested  that  the  Commission  would  ensure  harmonization  in  the 
taxation  on  wine  and  spirits  in  the  EU  and  national  measures  to  eliminate  room  for  national 
interpretation. In particular, it emerged that while various Member States support more accurate 
definitions  and  greater  clarity  in  legislation  in  order  to  reduce  legal  uncertainty,  views  are 
divided on whether this should be achieved by establishing common thresholds on the amount 
of fermented alcohol used in mixtures.  

More  generally,  the  debate  also  showed  the  persistence  of  divided  views  on  the  structure  of 
excise  duty,  with  some  MS  in  favour  of  taxation  per  alcohol  content,  while  for  other  MS  the 
current rules should not be touched. 

38 REFIT  Platform  Opinion  on  the  submission  by the Scottish  Council  for  Development  and  Industry  and a 
Member   of   the   REFIT   Platform   Stakeholder group  on  the  common  interpretation of  EU  laws  on 
Wine and Spirits Date of Adoption: 07/06/2017. 

https://ec.europa.eu/info/sites/info/files/xviii12abinterpretationeulawswine.pdf 

89 

 
 
 
 
 
                                                 
ANNEX 3.  WHO IS AFFECTED BY THE INITIATIVE AND HOW 

1. 

Practical implications of the initiative 

National  authorities  are  affected  by  this  initiative  as  it  will  increase  the  legal  certainty  and 
thereby reduce their administrative burden.  

Economic operators who manufacture or use alcohol are affected by this inititave. This initiative 
reduces  the  legal  uncertainties  that  currently  exist  and  reduces  the  competitive  distortions 
between economic operators who are involved in cross-border trade. 

The  costs  and  benefits  of  each  option  are  analysed  in  detail  in  section  6  for  each  distinctive 
problem area. 

2. 

Summary of costs and benefits 

The  tables  below  summarise  the  costs  and  benefits  (in  million  euros)  for  all  preferred  options 
together. 

I. Overview of Benefits (total for all provisions) – Preferred Options 

Description 

Member States 

Administrative costs savings  

Amount 
per year 

Direct benefits 

Comments 

No 
change39 

Introducing a differentiation in the OFB category will 
reduce  the  instances  of  BTI  shopping,  laboratory 
testing  and  administrative  burden  to  deal  with  these 
products. 

Fiscal  fraud  and  associated  revenue, 
health risk 

++ 

Legal Certainty 

+++ 

Clarification  of  independent  brewer  will  ease  the  cost 
of implementing the reduced rates scheme for Member 
States. 

Less scope for intentional misclassification of PDA so 
as to avoid controls 

Addressing  the  classification  of  certain  alcoholic 
beverages  will  reduce  the  foregone  tax  revenues  of 
products that exploit the current uncertainties. 

Clarification will ensure a harmonised approach across 
the EU in terms of indirect uses of denatured alcohol, 
measurement  of 
the  Plato  degree  of  sweetened 
/flavoured  beers,  classification  of  certain  alcoholic 
beverages  and  the  operation  of  the  reduced  rates  for 
small producers. 

clarification  will 

This 
divergent 
interpretations,  disputes  and  associated  costs  for 

reduce 

the 

39   No change, as in the worst case scenario benefits could be neutralised by the risk of new borderline products 

90 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Member States.  

Economic Operators 

Operating costs  

+ 

Cost  savings  for  users  of  PDA  in  MS  that  do  not 
currently exempt indirect uses.  
Clarification  of  PDA  terms  will  lower  the  risk  of 
delays / costs associated with disputes with authorities. 

Clarification on classifying certain alcoholic beverages 
will reduce the  
Clarification  /  extension  of  the  scheme  for  small 
producers will result in costs savings for small brewers 
/ cider makers 

Economic Operators 

Indirect benefits 

Functioning  of  the  single  market  and 
competition 

Clarification  will  reduce  the  divergent  interpretations 
and associated costs for economic operators. 
Greater  transparency  and  legal  certainty  may  result  in 
fairer  competition  and  improve  the  ease  of  doing 
business cross-border. 
The  competitiveness  of  small  producers  and  low 
strength  alcohol  would  be  greatly  enhanced,  as 
diseconomies of scale and market access barriers could 
be counterbalanced.  

II. Overview of costs (million euros) – Preferred options 

Denatured alcohol 

Businesses 

Administrations 

One-off  Recurrent  One-off  Recurrent 

Direct costs 
Indirect costs 

0.00  Minimal 
0.00 
0.00 

0.00  Minimal 
0.00 
0.00 

Classification 
of 
alcoholic beverages 

certain 

Direct costs 

9.2-
15.640 
1.041 

0.00 

+42 

35 - 
25043 

40   Administrative costs of a new category 
41   Administrative burden from a new EPC 
42  

Impact  of  options  on  competent  authorities  cannot  be  quantified.  The  affected  population  is  limited  so  in 
aggregated terms it may be modest. 

43   Lost tax revenues due to a new category - the gap ranges from EUR 35 million if borderline cider is kept out 

of the reclassification process. 

91 

 
 
 
 
 
 
 
  
                                                 
Reduced rates – small brewers 

Indirect costs  0.00 

Direct costs 
0.00 
Indirect costs  0.00 

Reduced  rates  –  small  cider 
makers 

Direct costs 

Minimal 

Reduced  rates  –  low  strength 
beer 

Plato 

TOTAL 

Indirect costs  0.00 
0.00 

Direct costs 

Indirect costs  0.00 

Direct costs  Minimal 
Indirect costs  0.00 
Direct costs 

Indirect costs 

Modest44 

0.00 
0.00 
0.4545  Modest  Modest 
0.00 
0.00 

0.00 

EUR 
0.32 / hl 
0.00 

0.00 

Minimal 

0.00 

0.00 

0.00 

0.00 

  Minimal 
0.00 

0.00 

15 

0.00 

<1% of 
total tax 
revenue  
0.00 

0.00 

3. EVIDENCE AND STAKEHOLDERS' VIEWS ON THE ADMINISTRATIVE COSTS AND BURDENS 

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. Evidence collected in the evaluation 
and feedback  gathered  from the day-to-day  application of the Directive's provisions led to  the 
conclusion that there was 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  resulting  room  for  diverging  interpretation  involuntarily  allowed  since  1992  economic 
operators,  as  well  as  national  tax  administrations,  to  establish  their  own  modus  operandi. 
Although it could be concluded after the Ramboll Evaluation and the Study that the Directive 
functions  generally  well  overall,  the  diverging  interpretations  result  in  problems  where  these 
views differed. 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 focus 
particularly  on  those  areas  where  economic  operators  see  excessive  costs  and  burdens.  In  the 
case of Directive 92/83/EEC the discussion is shifted from not so much the excessive costs and 
burdens to unnecessary costs and burdens, which could be avoided if the Directive functioned 
better.  

For example, the majority of problems relate to the legal uncertainty that the economic operators 
experience  with  production,  use  and/or  movement  of  some  alcoholic  products.  These  are  the 
costs  that  stem  not  from  the  requirements  of  the  Directive  as  such  (most  of  the  requirements 
related to the holding and movement of excisable products stem from Directive 2008/118/EEC) 
but from its imperfect application or, in certain cases, the fact that the legislation has not kept 
abreast of new developments. 

44   Some  aromatised  wine  products  classified  as  CN  2206  may  fall  within  the  reclassification,  (the  estimated 
decline  in  sales  when  compared  to  the  overall  alcoholic  beverage  markets  is  less  than  0.4%  in  the  worst 
scenario) 

45   Administrative burden linked to the uniform certificate for small brewers. 

92 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
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.  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.  

Summary of REFIT 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 
the 
receiving MS 

authorities 

of 

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 
and 
national authorities 

businesses 

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 

subsequently 

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

CDA 
operating 
border 

producers 
cross-

-  and 

The  savings  stemming  from  the 
legal costs related to disputes over 
the  PDA  and  their  use  in  other 
products 
subsequently 
elimination  thereof-    are  case-
specific  and  the  baseline  values 
the 
were 
stakeholders 
for 
estimations of benefits 

reported 
to 

by 
allow 

not 

PDA 
and 
users 
producers  operating 
cross-border 

National 
administrations 
(customs 
laboratories) 

Cider/perry 
producers across the 
EU 

National 
administrations 

2
M
E
L
B
O
R
P

n
o
i
t
a
c
i
f
i
s
s
a
l
C

Legal  certainty  at  EU  level 
and  consistent  treatment  of 
borderline  products  across 
MS. However,  the distinction 
between  the  products  may 
lead  to  the  creation  of  new 
borderline  products  which 
could, in worst case scenario, 
neutralise benefits of any new 
clear definition 

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

Familiarisation  cost: 
approx.  €4,500  per 
company 
(including 
overheads) or  
aggregated  burden  of  
€ 4.5 million  

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 

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

93 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 
legally  and 
status  of  a 
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 

for 
in 

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

for 
in 

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

incur 

/  recognised  small 
Established 
brewers  would 
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 
across the EU 

breweries 

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 

€178 

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

Small 
cider 
producers across the 
EU 

3
M
E
L
B
O
R
P

stemming 

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

disparities 
of 

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 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 4.  ANALYTICAL MODELS USED IN PREPARING THE IMPACT ASSESSMENT 

The bulk of the data collection work was centred on a vast in-depth consultation of stakeholders, 
covering a total of 12 Member States, as well as EU-level institutions and organisations. Overall, 
160 interviews were conducted with different types of stakeholders, namely: public authorities and 
administrations (tax and customs authorities, public health authorities, agriculture authorities and 
others); economic operators of different size and active in different segments of the market and the 
value-chain;  non-government  public  health  organisations;  and  various  other  alcohol  market 
experts.  The  interview  programme  was  complemented  by  an  Open  Public  Consultation  that 
received a total of 166 responses. 

The Study results are also based on the result of the econometric analysis of an extensive database, 
with  EU  market  data  on  volume,  value  and  price  of  some  1,374  brand  lines  in  the  1990-2016 
(including  forecasts  until  2021)  period,  as  well  as  on  a  comprehensive  desk  research  including: 
EU and MS-level policy documents, scientific literature, various institutional databases, industry 
and  stakeholder  reports  and  papers,  web-sources  and  other  grey  literature,  both  published  and 
unpublished. 

The main focus of the analytical work was to compare the ‘no change’ scenario, developed on the 
basis  of  an  in-depth  baseline  assessment,  with  several  ‘policy  change’  scenarios,  using  both 
quantitative (cost/benefit) and qualitative (multi-criteria) methods. The impacts considered for the 
comparison  of  scenarios  belong  to  four  main  categories:  (i)  tax  revenues  and  burden;  (ii) 
regulatory costs and cost savings (including substantive compliance costs, administrative costs and 
enforcement  costs);  (iii)  market  effects  (including  Single  Market  functioning,  distortion  of 
competition, and SME competitiveness effects); and (iv) indirect social effects (illegal activities 
and fraud, and alcohol control policy objectives).    

The proposed policy options for the revision of the Directive may determine a variety of different 
economic  and  social  impacts  for  various  different  stakeholder  groups,  primarily  MS  competent 
authorities  and  economic  operators,  secondarily  consumers  and  public  health  stakeholders.  The 
different typologies of impacts assessed in this Study can be gathered in five main categories, as 
follows:  

Direct charges. Direct charges include taxes and fees paid by economic operators or consumers. 
In line with the nature and scope of Directive 92/83/EEC, the focus of this Study is excise duty on 
alcohol  and  alcoholic  beverages,  and  the  related  excise  duty  revenues  of  Member  States.  This 
dimension has been examined across all thematic areas considered. Unless differently stated, all 
references to ‘tax rates’, ‘tax structures’, ‘tax revenues’ etc. in this Report relate to excise duties. 
However, in some cases, the analysis has also encompassed VAT, and in particular the share of 
VAT that is imposed on the excise duty since this causes a multiplier effects on the variation of 
excise duty levels.          

Importantly, tax revenues have distributional impacts: what is a benefit for tax authorities may be 
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. In this sense an 
increase  of  tax  revenues  is  rated  positively  and  vice  versa.  Impacts  on  tax  revenues  can  be 
triggered by variations of: (i) rates applicable to excisable products, which is outside the scope of 
the  Study,  with  the  exception  of  provisions  on  reduced  rates  or  methods  for  the  calculation  of 
applicable  tax;  and  (ii)  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  below  under 
market  or  social  effects,  such  as  tax-induced  substitution  between  products,  per  capita 
consumption effects, demand for illicit products and fraud. 

95 

 
 
 
 
 
 
 
 
Compliance,  administrative  burden,  costs  and  cost  savings.  Compliance  costs  have  been 
considered  with  respect  to  the  changes  to  business  practices  linked  to  the  administrative 
requirements  concerning  denatured  alcohol.  Administrative  burden  for  economic  operators  have 
been  assessed  in  various  policy  options  implying  a  revision  of  the  Directive.  For  instance,  the 
creation  of  a  new  fiscal  category  for  certain  products  may  generate  administrative  burden  for 
economic  operators,  who  have  to  update  their  licenses  and  IT  systems.  Another  example  is  the 
quantification of the current administrative burden generated by the reduced rate scheme for small 
brewers, and the costs associated with its revision, or to the extension of the scheme to small wine 
producers and cider makers. 

Enforcement costs and benefits. As regards enforcement costs and benefits, two main types have 
been considered: 

(i)  enforcement costs and cost savings stricto sensu, which are those borne by public authorities 

to apply the revised Directive provisions; and  

(ii)  judicial  costs  and  cost  savings,  which  are  costs  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)  where  interpretations  and 
judicial disputes are no longer needed after a clarification or legal revision.  

Market  effects.  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  Study  did  not  attempt  to  assess  market  distortions  per  se,  but  those  that  might  go 
beyond  the  intended  objectives  of  the  regulator,  in  terms  of  Single  Market  functioning.  Four 
categories of possible market effects and distortions have been considered: 

1)  Tax-induced  substitution  across  products,  i.e.  when  the  demand  for  a  certain  product  is 
favoured  (hampered)  by  the  higher  (lower)  taxation  imposed  on  one  or  more  substitute 
products.  

2)  Cross-border distortions and illicit markets. This may be the case when consumers decide to 
purchase  a  certain  product  (e.g.  alcoholic  beverages,  denatured  alcohol)  in  another  MS,  or 
stop importing the same product from another MS, because of the different tax or regulatory 
treatment.  Effects  on  illicit  (or  informal)  markets  also  include  impacts  from  and  on  the 
quantity of ‘unrecorded alcohol’, i.e. alcohol which is not taxed and is outside governmental 
control. This includes cross-border shopping (both legal, and smuggling / ‘bootlegging’) and, 
most  importantly  for  the  policy  issues  considered,  surrogate  products  obtained  from 
previously denatured alcohol and home production.  

3)  Single Market functioning, and possible distortions induced by diverging legal treatments or 
uneven  application  of  Directive  provisions  or  other  administrative  obstacles  hampering  the 
circulation of products or affecting fair competition.  

4)  SME competitiveness, since certain impact may have a differential effects on small producers 
versus large manufacturers. This is specifically the case for the analysis of the ‘reduced rates 
for  small  producers’  issue,  where  both  the  baseline  assessment  and  the  impact  analysis 
consider  whether  and  to  what  extent  the  norms  at  stake  change  the  competitive  position  of 
SME. 

Indirect  social  effects.  This  category  includes  impacts  that  poorly  lend  themselves  to  a 
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 the broad sense. Two 
areas of social impact that have been considered related to the policy options at stake - although 

96 

 
 
 
 
 
 
 
 
indirectly - are namely: (i) public health (through alcohol control policy and measures); and (ii) 
tax fraud. 

The final step of the analysis of impacts consisted of the comparison of the policy options. The 
issues  at  stake  in  this  Study  require  policy  revisions  that  are  relatively  independent  from  one 
another.  Therefore,  the  comparison  of  options  have  been  performed  for  each  thematic  area 
separately, rather than in a cumulative way. Given the different nature of the impacts considered, 
the  final  comparisons  required  combining  different  approaches,  and  specifically,  a  partial  cost-
benefits analysis (CBA) approach for quantifiable (monetary) impacts, such as market effects, tax 
revenues  and  –  where  feasible  –  regulatory  costs,  and  a  multi-criteria  analysis  (MCA)  for  non-
quantifiable or mixed ones.  

97 

 
 
 
 
 
 
ANNEX 5.  COUNCIL CONCLUSIONS (6 DECEMBER 2016) 

The  Council  conclusions  on  the  Commission  Report  to  the  Council  on  the  evaluation  of 
Directive 92/83/EEC, adopted by the Council at its 3506th meeting held on 6 December 2016. 

COUNCIL CONCLUSIONS 

ON THE COMMISSION REPORT TO THE COUNCIL ON THE EVALUATION OF 

COUNCIL DIRECTIVE 92/83/EEC ON THE STRUCTURES OF EXCISE DUTIES ON 

ALCOHOL AND ALCOHOLIC BEVERAGES 

The Council (ECOFIN): 

1.  WELCOMES the Commission Report to the Council on the evaluation of Council 

Directive 92/83/EEC on the structures of excise duties on alcohol and alcoholic beverages 

and TAKES NOTE of the findings and recommendations set out in that Report. 

2.  AGREES with the assessment that, in general, Directive 92/83/EEC functions effectively 

and makes it possible to avoid tax-related trade barriers or competitive disruptions 

between economic operators in the same sector of activity. 

3. 

TAKES NOTE that the Commission Report concentrates exclusively on the structures of 

excise duties on alcohol and alcoholic beverages, and in no way either covers or combines 

the findings with the requirements laid down in Directive 92/84/EEC on the 

approximation of the rates of excise duty on alcohol and alcoholic beverages. 

4. 

CONFIRMS, that it is necessary to prevent ambiguities leading to distortions of 

competition between economic operators and to apply harmonised conditions and rules for 

taxing alcohol and alcoholic beverages. Moreover, it is essential to provide equal 

conditions for economic operators in the functional internal market, eliminate disruptions 

to fair competition and prevent tax evasion and avoidance. 

5.  NOTES, however, that the Directive could be amended as appropriate in order to 

eliminate certain ambiguities that sometimes cause particular types of alcohol and 

alcoholic beverages to be treated differently. This would also improve collection of excise 

duties and reduce administrative costs for both economic operators and tax administrations 

in Member States. 

98 

 
 
 
 
6. 

RECOGNISES 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 of alcoholic beverages with non-alcoholic beverages in order to unify the 

treatment for excise purposes of the same products across the Member States, and so 

ensure legal certainty and clarity for economic operators. 

7. 

STRESSES the need to ensure uniform treatment of alcoholic beverages, which are the 

mixture of fermented beverages and alcohol, and in this context, for the purposes of legal 

certainty, to clarify the notion of “entirely of fermented origin” in Directive 92/83/EEC. 

8.  AGREES with the assessment that clear rules are in place for applying reduced rates for 

small producers of beer and ethyl alcohol and INVITES the Commission to investigate the 

impact of extending those rules to small producers of still and sparkling wines, other 

fermented beverages and intermediate products. 

9. 

INVITES the Commission to investigate further the potential impact of allowing Member 

States to exempt from excise duties the production of ethyl alcohol and intermediate 

products for own consumption and to present a report to the Council and RECALLS the 

particular importance of striking the right balance between revenue, the costs of tax 

administration, other aspects relating to consumption and the impact on cross-border trade. 

10.  TAKES NOTE of the recent adoption of Commission Implementing Regulation 

2016/1867/EU stipulating one common "euro" procedure for completely denaturing 

alcohol and in this context, RECOGNISES that Article 27 of Directive 92/83/EEC, more 

generally, needs to be updated, in order to define the transparent and clear conditions for 

applying the exemptions for any type of denatured alcohol, without prejudice to the 

Member States' competences. 

99 

 
 
11.  RECALLS the need to achieve the right balance between preventing tax evasion and 

avoidance while ensuring flexibility in the use of different denaturing procedures laid 

down by the Member States in accordance with the point (b) of Article 27 (1) of Directive 

92/83/EEC, and ENCOURAGES the Commission to develop, in collaboration with all 

Member States, a clear definition of final products, which should eliminate the 

consequences of different treatment of products from denatured alcohol within internal 

market. 

12.  TAKES NOTE that in order to ensure further harmonization of the exemptions provided 

for in points (a) and (b) of Article 27 (1) of Directive 92/83/EEC, it might be necessary to 

amend the rules on holding and transporting denatured alcohol to reflect the provisions of 

Council Directive 2008/118/EC. 

13.  RECOGNISES that some CN codes referred to in Directive 92/83/EEC need to be 

updated, as this Directive was adopted more than 20 years ago. 

14.  TAKES NOTE that, in the interest of clarity and given the potential revision of Directive 

92/83/EEC, rules that were designed for specific Member States and are no longer used 

could be removed. 

15.  REQUESTS that the Commission, taking into account these Council Conclusions and the 

objectives set out in Directive 92/83/EEC, undertakes all relevant studies and, after 

carrying out the relevant technical analysis, public consultations and an impact 

assessment, submits to the Council an appropriate legislative proposal in 2017 or, in case 

it chooses not to submit a proposal, informs the Council of the reasons. 

100 

 
 
 
 
 
ANNEX 6.  DRIVERS OF THE DYSFUNCTIONS IN THE APPLICATION OF EXEMPTIONS 

FOR DENATURED ALCOHOL 

Driver 1: an incomplete / inconsistent mutual recognition of CDA 

According to the Directive, MS are allowed to use their own methods for complete denaturing 
of alcohol as long as they notify them to the Commission. These formulations are to be further 
mutually recognised by all MS. Until recently, the majority of the MS had at least one national 
denaturing formulation notified, in addition to the EU common denaturing method known as the 
Eurodenaturant.  The  extent  to  which  MS  indeed  respected  the  principle  of  mutual  recognition 
varied considerably. 

The problem was not so acute in the context of the domestic market but it became potentially 
distortive when CDA was moved over borders, from one MS to another. In the Study, some MS 
specifically stated that they would only recognise a method authorised by the MS of origin of 
the  denatured  alcohol  (e.g.  denatured  alcohol  from  Slovakia  using  Germany’s  recognised 
method  of  complete  denaturation  would  not  be  recognised  as  a  CDA  in  Romania);  other  MS 
held  the  view  that  producers  from  other  MS  selling  CDA  to  that  country  would  be  able  to 
choose  from  all  the  different  formulations  notified;  finally  a  few  MS  would  only  accept  their 
own denaturing method or the Eurodenaturant.  

Paradoxically,  producers  of  denatured  alcohol  in  third  countries  enjoyed  in  practice  greater 
freedom  and  opportunities,  with  most  of  the  MS  recognising  any  denaturing  formulation 
notified in accordance with the Directive.  

For  CDA,  the  adoption  of  the  new  Commission  Implementing  Regulation  2017/223646  has 
clarified  the  position  for  most  MS  by  the  implementation  of  a  common  harmonised  CDA 
formulation. However, in order to truly complete the harmonisation, this needs to be reflected in 
the Directive because as it is currently written, there is a significant risk that it could attract the 
re-introduction  of  weaker  CDA  formulations  via  the  notification  procedure,  and  undo  all  the 
work to date.  

Driver 2: divergent national approaches to partially denaturing alcohol (PDA) 

In  terms  of  PDA,  the  EU  rules  are  largely  non-harmonised  and  there  are  thousands  of  PDA 
formulations  in  use  across  the  EU.  The  European  alcohol  denaturant  database47,  which  holds 
information  of  formulations,  is  currently  out  of  date,  not  sufficiently  maintained  by  the  MS 
administrators and there is no external access to industry to allow them to check the validity of a 
particular formulation.  

There  are  fundamental  differences  in  the  control  and  administration  regimes  applied  in  MS, 
creating unfair competition and burdens on business. The Directive only stipulates that PDA is 
exempted  from  excise  duty  while  leaving  the  modalities  regarding  partial  denaturation  to  the 
MS. Moreover, unlike in the case of the CDA,  the duty  exemption is  conditional on the basis 
that  it  has  been  used  in  the  manufacture  of  a  product  which  is  unfit  for  human  consumption. 
Some PDA is moved cross borders under the duty suspension rules using Excise Movement & 

46 

Commission  Implementing  Regulation  (EU)  2017/2236  of  5  December  2017  amending  Regulation  (EC)  No 
3199/93  on  the  mutual  recognition  of  procedures  for  the  complete  denaturing  of  alcohol  for  the  purposes  of 
exemption from excise duty, OJ L 320, 6.12.2017, p. 6–9. 

47  This database is managed by the Commission (Joint Research Centre). 

101 

 
 
 
                                                 
Control  System  (EMCS),  which  is  a  computerised  system  for  monitoring  the  movement  of 
excise  goods  under  duty  suspension  in  the  EU,  which  creates  a  financial  and  administrative 
burden  on  the  economic  operator.  Whereas  in  other  MS  economic  operators  are  allowed  to 
release the “finished” product (often in bulk, e.g. screenwash), which is in free circulation (i.e. 
EMCS is not used) and is not considered an excise product anymore. In this scenario, the MS do 
not necessarily need to recognise each other's denaturing formulations.  

MS’  regulatory  and  administrative  frameworks  vary  significantly  regarding  the  procedures 
governing  supervision  of  the  production,  movement  and  use  of  PDA,  formulations  they  have 
authorised  (sometimes  just  a  few,  sometimes  hundreds)  and  the  process  for  obtaining 
authorisations  (in  some  MS  this  is  limited  to  the  formulations  on  the  official  published  list, 
whereas others can authorise formulations ‘ad hoc’ for individual economic operators).  

The  PDA  made  in  a  given  MS  in  accordance  with  its  national  requirements  can  be  moved  to 
another MS using the EMCS. However, it will not be recognised as legally denatured (and thus 
not  exempted  from  excise  duty)  when  used  for  the  manufacture  of  products,  unless  it  also 
complies with the formulation and authorisation requirements of the receiving MS (which may 
be  different).  This  frequent  lack  of  transparency  of  formulations  authorised  in  each  MS  was 
described by producers as difficult and time consuming. German producers advised that is not 
viable  to  supply  customers  in  some  MS  (such  as  Czech  Republic,  France)  as  the  supervisory 
regimes in these MS are particularly strict towards foreign producers.  

While  the  use  of  EMCS  is  obligatory  for  all  cross-border  movements,  some  (but  not  all)  MS 
allow simplified procedures for movements of PDA within their own territory. Furthermore each 
MS has their own system of registrations, licenses and authorisations for alcohol producers and 
economic operators using alcohol in the production process. Spain requires the presence of a tax 
official during the denaturation process. France allow for "in situ" denaturation in certain sectors 
(cosmetics),  meaning  users  can  buy  pure  alcohol  and  denature  it  on  their  own  premises, 
sometimes as part of the production process. These variances cause problems for industry as it is 
described in detail under consequences (see section 2.3.5).  

The greater problem is the difference in application among MS as to the uses of PDA, and how 
the  Directive  is  ambiguous  in  its  attempt  to  define  denatured  alcohol  which  is  used  in  the 
manufacture of a product not for human consumption. Additional to this, there are thousands of 
PDA  formulations in  use across the EU and  many of them  do not  contain chemical analytical 
markers, rendering them impossible to detect in illicit potable spirit. Consequently this leads to 
very  strong  enforcement  and  compliance  regimes  in  some  MS  –  which  puts  financial  and 
administrative burdens on some economic operators in these MS. This is best illustrated in the 
cosmetics  and  perfumes  sector.  Manufacturers  who  operate  in  several  MS  find  themselves 
making the same products using PDA but where the holding, movement and even the processing 
of the alcohol is different. It is clear from the Ramboll Evaluation and from the outputs of the 
Fiscalis Project Group that in some circumstances, MS have found some practical workarounds 
to  the  problems  for  PDA,  but  this  has  not  overcome  the  inconsistency  problem  of  application 
across the EU nor has it addressed the concerns of industry that there is no level playing field in 
certain manufacturing sectors. 

Overall, the vast majority of national authorities and economic operators alike, consulted in the 
context of the supporting Studies, appreciated the flexibility offered by the system, leaving it to 
the MS to apply rules that best meet the needs of their industry (which vary significantly from 
sector to sector), while reducing the risk of fraud to a level that is deemed acceptable by the MS 
in  question. The single market functions properly for products containing PDA, in  so far that, 
for  example,  perfume  made  in  France  containing  PDA  in  accordance  with  the  French 
requirements can be sold freely across the EU. At the same time, it is clear that the same is not 
entirely the case for PDA itself because of the lack of harmonisation. 

102 

 
 
Driver 3: divergent interpretations of certain terms related to PDA 

The ambiguous text of Article 27(1)(b) which defines PDA and related terms continues to cause 
uncertainties  and  discrepancies.  The  term  ‘used  for  the  manufacture  of’  includes  indirect  uses 
(such as  cleaning manufacturing  equipment and production lines).  However  a minority  of MS 
do not consider that PDA used for these purposes qualifies for the exemption. This results in an 
unfair treatment across the EU and costs for users in these MS (i.e. denatured alcohol used in 
cleaning lines which is then destroyed attracts the same excise duty rate as potable alcohol.)  

As  noted  previously,  PDA  itself  has  to  be  moved  under  the  duty  suspension  regime,  whereas 
finished products containing PDA are released for free circulation. Thus, the question of when 
alcohol ceases to be classified as PDA, and becomes a finished product, has important practical 
consequences.  There  are  disagreements  as  to  what  constitutes  a  ‘finished  product’  containing 
PDA that can be exempted from excise duty and released for consumption. Doubts can arise in 
particular  regarding  products  with  very  high  alcohol  content,  such  as  screenwash  or  other 
cleaning products. This creates legal uncertainty and increases the risk of fraud as the scope for 
the misclassification of PDA mixed with very small quantities of other substances is possible. 
(This is discussed further under driver 4, which deals with fraudulent uses of PDA.)  

It should be noted that the Indirect Taxes Expert Group adopted an opinion in 2014 to clarify the 
term  finished  product,  however  as  the  recommendation  is  not  legally  binding,  some  diverging 
national practices continue.  

Driver 4: potential for fraudulent use of denatured alcohol 

Although  comprehensive  and  reliable  evidence  is  not  well  documented,  there  are  strong 
indications  that,  in  some  MS  at  least,  fraud  with  denatured  alcohol  is  significant.  This  risk  is 
associated  with  the  diversion  of  alcohol  intended  for  industrial  uses  into  the  potable  alcohol 
market. Stakeholders predominantly in Eastern European MS (including CZ, PL, LT) reported 
that fraud involving denatured / industrial alcohol is a significant concern. From a public health 
perspective, certain denaturants (in particular methanol, which is widely considered the greatest 
hazard) are toxic, and can lead to illness and even death when consumed. 

The role of surrogate alcohol (i.e. purified denatured alcohol) within this is also likely to vary 
significantly.  In  many  MS  (including  DE,  ES,  FR),  the  interviewed  stakeholders  unanimously 
agreed that the consumption of surrogate alcohol is almost unheard of due to a combination of 
cultural and socioeconomic factors. These factors include the comparatively low levels of excise 
duty for alcoholic beverages, (including the zero rate on wine) meaning legal alcohol is cheaply 
available,  which  reduces  the  incentives  for  fraud  and  makes  the  purification  of  denatured 
alcohol  unattractive  economically).  However  a  recent  seizure  worth  EUR  460  000  in  Ireland 
indicates that fraud involving denatured industrial alcohol occurs in other MS as well48.  

In  the  responses  to  the  2015  Ramboll  evaluation  questionnaire,  the  highest  estimates  (from  a 
small  minority  of  MS)  were  that  abuses  of  the  exemptions  for  denatured  alcohol  were 
responsible for 40-80% of the loss of spirits duty from fraud.  

The manifestations of the problem are varied. They include purified denatured alcohol (typically 
from  solvents,  thinners,  barbecue  firelighters,  screenwash  or  anti-freeze)  from  which  the 
smelling  and/or  tasting  agents  have  been  chemically  removed,  and  which  is  then  used  for  the 

48   https://www.revenue.ie/en/corporate/press-office/press-releases/2017/pr-301117-alcohol.aspx 

103 

 
 
                                                 
manufacture of illicit beverages (usually spirits). There are also reports of cosmetics or personal 
care products, such as mouthwash or after shave, that can be drunk ‘as is’ (i.e. without removing 
the denaturants), and are sometimes sold and bought with this purpose in mind. Currently there 
is  a  Court  of  Justice  of  the  European  Union  (CJEU)  case  (C-567/17) regarding  alcohol  which 
was  partially  denatured  in  accordance  with  the  requirements  of  a  MS  and  subsequently  the 
alcohol was moved, duty exempt, to Lithuania for use in the production of cosmetic products, 
including mouthwash.  

Box 1 – CJEU case C- 567/17: Bene Factum’ UAB (Lithuania) 

The  Lithuanian  company  is  engaged  in  the  manufacture  of  and  trade  in  cosmetics  and 
personal  care  products.  The  Lithuanian  company  bought  mouthwashes  and  cosmetic 
alcohol  from  a  Polish  company  for  commercial  purposes.  The  ethyl  alcohol  contained  in 
the  products  was  denatured  in  accordance  with  the  requirements  of  Poland  before  the 
products were transported to Lithuania. Accordingly, the Lithuanian company, relying on 
the  provisions  of  the  Directive,  considered  the  ethyl  alcohol  contained  in  the  products 
exempt from excise duty. 

The  Lithuanian  tax  authorities  carried  out  a  tax  inspection,  which  indicated  that  the 
products  were  supplied  to  various  wholesale  and  retail  undertakings  and  ultimately  the 
products were sold as intoxicating alcoholic beverages. The tax authorities believe that the 
Lithuanian company failed to take any real action to prevent these cosmetic products being 
consumed as alcoholic beverages and therefore believe that the products are liable to excise 
duty.  

Both  parties  agree  that  the  ethyl  alcohol  contained  in  the  products  was  denatured  in 
accordance with the requirements of a MS. However they disagree as to whether or not the 
products  meet  the  condition  that  they  are  not  fit  for  human  consumption.  The  CJEU  is 
called  to  rule  on  whether  the  exemption  in  article  27  (1)(b)  should  be  interpreted  as 
applying to any products not for human consumption in accordance with their basic (direct) 
intended use, irrespective of the fact that some individuals may consume cosmetic products 
as alcoholic beverages for intoxication purposes.  

Another  way  the  problem  manifests  itself  involves  'finished  products'  containing  alcohol 
(whether  denatured  or  not)  that  are  classified  and  shipped  as  something  else  (see  driver  3 
above). Several MS reported being aware of cases where bulk shipments of alcohol with only 
minimal  quantities  of  other  ingredients  (such  as  detergent  and/or  colour)  were  declared  as 
Combined Nomenclature (CN) codes other than 2207 – such as CN codes 3820 (anti-freeze) or 
3824 (miscellaneous chemical products) – and therefore moved without any controls. National 
authorities  admitted  that  they  could  not  be  certain  of  the  scale  of  the  problem,  since  such 
movements  are  not  registered  under  EMCS,  and  detection  therefore  relies  on  more  or  less 
random  checks.  Some  MS  thought  there  were  only  a  few  isolated  cases,  but  other  MS 
(especially CZ, PL) believed it could be significant and provide a route for fraudulent activity.  

The  risks  are  obviously  proportionate  to  the  cost  of  the  products  in  question  –  for  example, 
many stakeholders tend to agree that the high retail cost of certain perfumes justifies the use of 
‘weak’ denaturants (such as essential oils), as there is no risk of such products being purchased 
with  the  intention  of  drinking them.  Others,  however,  insist  on the importance  of  including  at 
least a chemical marker in all PDA formulations as a matter of principle.  

104 

 
 
 
 
 
ANNEX 7.  CLASSIFICATION OF ALCOHOLIC BEVERAGES 

1  Customs classification 

The  relevant  classification  for  trading  purposes  of  alcohol  and  alcoholic  beverages  is  the 
customs  classification.  Laid  down  in  the  Combined  Nomenclature  (CN)49  -  a  further 
development of the Harmonized System (HS) nomenclature of the World Customs Organization 
(WCO)50 - this classification is  used  to determine the applicable tariff (‘tarification’) to  goods 
declared  to  customs  in  the  EU.  As  discussed  further  below,  the  CN  classification  determines 
also the excise duty category of products and is therefore at the core of the ‘classification issue’ 
described in this Section.  

CN  codes  have  (on  CN  level)  8-digits.  The  first  4-digits  are  the  most  important,  since  they 
define the product ‘heading’ and are relevant for the determination of the excise duty. In a few 
cases,  however,  the  tax  categorisation  of  certain  products  make  reference  to  6-digit  or  8-digit 
sub-headings (e.g. for sparkling wine and other fermented beverages). As of the latest revision51, 
the customs classification included an overall 180 8-digit sub-headings clustered into six main 
headings as in Table 4 below.  

Table 4 – Structure of the HS/CN classification of alcohol and alcoholic beverages            

CN / HS headings (4 digits) 

6-digit52 

8-digit  

3 subheadings 

126 subheadings 

none 
5 
subheadings 
2 
subheadings 

2203 Beer made from malt. 
2204  Wine  of  fresh  grapes,  including  fortified  wines;  grape 
must other than that of heading 2009. 
2205  Vermouth  and  other  wine  of  fresh  grapes  flavoured 
with plants or aromatic substances. 
2206  Other  fermented  beverages  (for  example  cider,  perry, 
mead);  mixtures  of  fermented  beverages  and  mixtures  of 
fermented  beverages  and  non-alcoholic  beverages,  not 
elsewhere specified or included.    
2207  Undenatured  ethyl  alcohol  of  an  alcoholic  strength  by 
volume of 80% vol or higher; ethyl alcohol and other spirits, 
denatured, of any strength. 
2208  Undenatured  ethyl  alcohol  of  an  alcoholic  strength  by 
volume  of  less  than  80%  vol;  spirits,  liqueurs  and  other 
spirituous beverages. 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages", 2017; author’s analysis of EBTI database (accessed in February 2017). 

7 
subheadings 

54 subheadings 

4 subheadings 

2 subheadings 

7 subheadings 

none 

none 

The CN, and its parent HS, are closed systems designed to comprehend all traded products, so 
each heading includes one or more residual ‘other’ category(ies) to cover products not explicitly 
mentioned in the definitions. This entails that new products not strictly matching the definitions 

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2016:294:TOC 
See http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs-nomenclature-2017-edition.aspx 

49  
50  
51   Commission implementing regulation (EU) 2016/1821 of 6 October 2016 amending Annex I to Council Regulation (EEC) 

No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, OJ L 294, 28.10.2016. 

52   Until the 6-digit level the CN and the HS codes coincide.  

105 

 
 
 
 
 
 
 
                                                 
provided should in any case fit into one of the existing CN codes. To facilitate coding, the CN 
(and the HS) is underpinned by non-binding Explanatory Notes (CNEN), which are revised and 
adjusted periodically.  

For  legal  certainty  on  the  correct  ‘tarification’  of  beverages,  and  to  prevent  the  risk  that  the 
attribution of a certain CN code is challenged (and fined) by customs or tax authorities when the 
product  is  already  commercialised,  economic  operators  may  apply  for  a  Binding  Tariff 
Information  (BTI).  These  are  classification  decisions  issued  by  the  customs  administration  of 
any Member  State,  which are binding throughout  the EU for a period  of normally  three  years 
(unless  the  classification  code  changes  or  it  is  affected  by  EU  or  international  customs  tariff 
measures or by a CJEU judgement). For products of dubious classification, such as certain new 
products,  BTIs  represent  a  practical  solution  to  avoid  disparities  of  treatment  and  ensuing 
disputes with customs authorities. However, since the tax classification is determined by the CN 
code,  BTIs  may  also  become  a  source  of  controversy  between  countries.  Economic  operators 
may  be  tempted  to  request  a  BTI  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.       

According to the database  maintained by DG TAXUD,  there are 1,025 alcoholic  beverages in 
the EU that are covered by a BTI decision.53 Of course, BTIs do not only address products that 
intend  to  obtain  a  more  favourable  treatment,  however  a  cursory  analysis  of  the  distribution 
across  CN  subheadings  (Table  5)  may  provide  a  first  hint  of  the  areas  where  classification 
ambiguities prevail. In particular: 

  Other  fermented  beverages,  other  than  cider  and  perry  (CN  2206  0039  and  CN  2206 
0059), alone account for a quarter of all BTIs, nearly as many as beer, wine and all other 
fermented beverages altogether. 

  There are also frequent BTIs in the area of aromatised wine product (AWP)54 below 18% 

vol (CN 2205 1010), which is another area of accelerated innovation. 

  The high concentration of BTIs in categories like other spirituous beverages (CN 2208 
9069) and liqueurs and cordials (CN 2208 7010) may be partly explained by borderline 
products, e.g. certain ‘mixed drinks’ that did not manage to obtain a more favourable CN 
2206 classification.       

Table 5 – Distribution of BTIs across CN codes and EU countries 

 CN Heading and Sub-heading 

No. of BTI 

Most Frequent MS of emission 

All Beer (2203) 

All Wine (2204) 

Flavoured wine < 18% vol (2205 1010) 

75 

66 

81 

DE, UK 

DE, FR 

IT, FR 

53   DG TAXUD, European Binding Tariff Information database, available at: 

54  

http://ec.europa.eu/taxation_customs/dds2/ebti/ebti_consultation.jsp?Lang=en, last accessed on 02 May 2017. 
In this Report, ‘aromatised wine products’ (abbreviated as AWP) refer generically to any kind of such products, including 
the three main subcategories laid down in Regulation (EU) No 251/2014: (1) aromatised wines; (2) aromatised wine-based 
drinks; and (3) aromatised wine-product cocktails (see Article 3 for the respective definitions). In practice, subcategory (1) 
is of little relevance for our analysis, and references to ‘AWP’ should be interpreted as primarily referred to subcategories 
(2)  and  (3)  (sometimes  made  explicit  in  the  text).  It  is  important  to  highlight  that  our  analysis  focuses  on  fiscal 
classification  of  products  and  not  to  sectoral  classification  (as  it  is  the  case  with  Regulation  251/2014),  so  in  our 
understanding  ‘AWP’  includes  all  products  that  may  be  taxed  accordingly,  irrespectively  of  the  ‘blurred’  boundaries 
between the product definitions established in Regulation 251/2014.                

106 

 
 
 
 
 
     
                                                 
  
Rest of flavoured wine (2205) 

OFB, sparkling other (2206 0039) 

OFB, still other (2206 0059) 

Rest of OFB (2206) 

Ethyl alcohol > 80% (2207) 

Liqueurs and cordials (2208 7010) 

Other spirituous beverages (2208 9069) 

Rest of Ethyl alcohol < 80% (2208) 

15 

89 

163 

55 

61 

64 

258 

98 

FR, UK 

UK, FI 

FR, DE, PT, UK, FI 

UK, FR 

NL, CZ 

IT, IE 

FR, UK, CZ, SK, EE 

FR, FI, DE 

Source: Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on 
alcohol and alcoholic beverages"; author’s analysis of EBTI database (accessed in February 2017). 
Note: The CN codes reported in this Table relate to the latest version, i.e. Impl. Reg. 2016/1821.   

Since the tax classification is determined by the CN code,  BTIs may also become a source of 
controversy between countries and between economic operators. The following box highlights 
evidence of such disparities:  

Box 2 – Review of selected BTI decisions (from the EBTI database) 

Case 1 – Fruit-wine based alcoholic beverages with addition of ethyl alcohol 

The  UK  classified  as  2206.0059  (still  other 
fermented  beverage  other  than  cider  and  perry)  a 
mixture of cider (obtained from the fermentation of 
apple juice and sugar) and water, sugar, citric acid, 
fruit  flavours,  colours  and  preservatives,  fortified 
with  the  addition  of  ethyl  alcohol  to  bring  the 
strength up to 21.9%. 

Case 2 – Fruit-wine based alcoholic cream 

fermentation  of 

Poland  classified  as  2208.9069  (other  spirituous 
beverages) a mixture of fruit wine (obtained from 
fruit 
the 
concentrate and glucose syrup) and water, colours 
and  flavours,  fortified  with  the  addition  of  ethyl 
alcohol to bring the strength up to 21%. 

an  unspecified 

The  UK  classified  as  2206.0059  (still  other 
fermented  beverage  other  than  cider  and  perry)  a 
‘country  cream’  obtained  by  mixing  fermented 
apple wine with cream, with a 14.8% vol. 

Ireland  classified  as  2208.7010  (liqueurs  and 
cordials)  a  ‘country  wine  based  cream’,  with  a 
14.9% vol. 

Case 3 – Wine-based ready-to-drink 

Germany  classified  as  2206.0039  (sparkling  other 
fermented beverage other than cider and perry) an 
aromatised wine-based drink made of: wine (white 
wine  or  rosé  wine),  demineralised  water,  inverted 
sugar  syrup,  citric  acid, 
lactic  acid,  sodium 
benzoate,  flavourings,  colours,  sulphur  dioxide, 
and carbon dioxide, with an alcohol content of 5% 
vol. 

The Netherlands classified as 2208.7010 (liqueurs 
and  cordials)  an  aromatised  wine-based  drink 
made of: wine, sparkling water, syrup, citric acid, 
and  natural  flavours,  with  an  alcohol  content  of 
5%,  due  to  the  fact  that  –  after  the  addition  of 
water,  sugar  and  flavourings  –  the  ‘character  of 
wine had been lost’. 

An  aromatised  wine product  coded  CN  2205  may  be  taxed  according  to  three different  categories,  i.e. 
Art.  8,  Art.  12  or  Art.  17  depending  on  the  addition  of  alcohol,  the  overall  strength,  and  its  specific 
denomination. 

Pre-mix drink may be subject to Art. 12, Art. 17 or Art. 20 depending, again, on the alcohol origin and 
blend, the strength, and various country-specific rules. 

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

107 

 
 
 
 
 
There have been cases where disparities in the interpretation of the CN classification prompted 
the  issuance  of  a  normative  act  that  eventually  repealed  existing  BTIs  on  certain  products.  In 
particular, this was the case with Regulation 1967/2005, which ruled that a certain beer product 
flavoured with tequila should be considered beer as defined under CN 2203.55   

2  Excise duty classification 

The  excise  duty  classification  is  determined  by  the  harmonised  definitions  laid  down  in 
Directive 92/83/EEC. According to Article 26 of the Directive, reference should be made to the 
CN ‘version’ in force at the time of adoption, i.e. Regulation 2587/91.56 However, as discussed 
above, the CN codes and the related explanatory notes are periodically revised. So Regulation 
2587/91  is  no  longer  in  force,  replaced  by  more  recent  ones  (the  latest  being  Commission 
Implementing  Regulation  2016/1821).  In  this  sense,  the  Directive  contains  references  to  CN 
codes that are, in principle, outdated. The issue was analysed in the Ramboll Evaluation, which 
concluded  that  it  is  not  a  source  of  practical  problems  and  primarily  a  purely  administrative 
issue (see Box 3 below). For this reason, and in agreement with the Commission, this matter is 
not in the scope of this Study. 

Box 3 – Article 26 of the Directive and the issue of references to outdated CN codes 

Article 26 establishes that the references to CN codes contained in the Directive relate to the version in force at the 
time  of  adoption,  i.e.  Regulation  2587/91. However,  since  Regulation  2587/91  is no  longer  in  force,  repealed  by 
more  recent  version  of  the  Combined  Nomenclature  (the  latest  being  Commission  Implementing  Regulation 
2016/1821), this means that the Directive contains references to CN codes that are, in principle, outdated.  

On  a  closer  look,  the  issue  regards  only  two  8-digit  CN  codes  no  longer  in  use  since  recent  versions  of  the 
nomenclature introduced further sub-headings. As shown in the excerpt reproduced in the Table in this box, there is 
no textual difference in the definition / description of the sub-heading in the two versions. The only difference lays 
in the fact that in Regulation 2016/1821 the numerical code is no longer mentioned. All other CN codes cited in the 
Directive are still valid today.  

Table 6 – Comparison between outdated and updated versions of the CN codes 

Commission Regulation 2587/91    

Commission Implementing Reg. 2016/1821 

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

1. 

Combined Nomenclature, OJ L 316, 2.12.2005. 
56    COMMISSION REGULATION (EEC) NO 2587/91 OF 26 JULY 1991 AMENDING ANNEX I  TO COUNCIL REGULATION (EEC) 
NO 2658/87 ON THE TARIFF AND STATISTICAL NOMENCLATURE AND ON THE COMMON CUSTOMS TARIFF , OJ NO L 259 OF 16. 
9.1991 

108 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
In theory, legal references to CN codes no longer in force may cause incongruences and uncertainties, but since the 
definitions have not changed there is no tangible consequences in using the outdated or the updated nomenclature 
version for the purpose of tax categorisation, in particular there is no risk that a product imported using a ‘new’ CN 
code could not be identified for excise duty purposes. Some CNEN have changed over time, but since CNEN are 
not legally binding (and are not explicitly mentioned in Article 26) they cannot fuel legal issues in the excise duty 
classification of the concerned products.  

The matter was explicitly addressed in the Ramboll Evaluation, in particular:57 

  According to Ramboll ‘these outdated references in the Directive were not reported by the stakeholders as a 
source of problems.’ (p. 116), and ‘there are no major, immediate and urgent negative consequences stemming 
from the reported inconsistencies’ (p.141). The results of our interviews confirm this conclusion. 

  Ramboll recommends to address this point in the next revision of Directive 92/83/EC. For the Commission this 
recommendation ‘concerns minor technical changes’ and is about ‘outdated references / good housekeeping’, 
i.e.: no relevant impact is envisaged (source: Commission Report to the Council COM(2016) 676 final).        
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages 

The  five  categories  established  in  the  Directive  (see  Table  7)  are  defined  primarily  with 
reference to CN 4-digits headings but the classification structure is partly different. In particular, 
there  is  no  separate  tax  category  for  vermouth  and  other  flavoured  wine  (like  CN  2205)  and 
there is only one category for ethyl alcohol including spirits instead of two – CN 2207 and CN 
2208. On the other hand, the excise duty classification contains the ‘intermediate products’ (IP) 
category that is not present in the CN classification. The tax and customs classifications differ 
also  at  a  more  granular  level,  and  the  result  is  that  each  tax  category  of  Directive  92/83/EEC 
may comprise of products that fall under multiple CN headings (see  

Table 8). 

A second important difference is that, unlike the CN classification, all tax categories are defined 
with reference to an explicit minimum and maximum alcohol strength, beyond which a product 
may change category, regardless of its nature. For instance, any fermented or mixed beverage, 
including wine, beer and cider, above 22% vol is taxed as ‘ethyl alcohol’. The harmonised tax 
categories  may  also  contain  reference  to  specific  characteristics  of  the  products,  although  not 
systematically (e.g. reference to the entire fermented origin of the beverage, enrichment etc.). 

Table 7 – The five excise duty categories of alcohol and alcoholic beverages (Directive) 

Category  

Beer  
(Article 2) 

Definition 
Any product falling within CN code 2203 or any product containing a mixture of beer with non-
alcoholic drinks falling within CN code 2206, in either case with an actual alcoholic strength by 
volume exceeding 0.5% vol. 

Still Wine:  (Paragraph 1) 
All  products  falling  within  CN  codes  2204  and  2205,  except  sparkling  wine  as  defined  in 
paragraph 2: 
— having an actual alcoholic strength by volume exceeding 1.2 % vol but not exceeding 15 % 
vol, provided that the alcohol contained in the finished product is entirely of fermented origin, 
— having an actual alcoholic strength by volume exceeding 15 % vol and not exceeding 18 % 
vol provided they have been produced without any enrichment and that the alcohol contained in 
the finished product is entirely of fermented origin. 
Sparkling Wine (Paragraph 2) 
All products falling within CN codes 2204 10, 2204 21 10, 2204 29 10 and 2205: 

Wine  
(Article 8) 

57 Ramboll, 2016.  

109 

 
 
 
 
   
 
 
 
                                                 
— are contained in bottles with ‘mushroom stoppers’ held in place by ties or fastenings, or they 
have an excess pressure due to carbon dioxide in solution of three bar or more, 
— have an actual alcoholic strength by volume exceeding 1.2 % vol but not exceeding 15 % vol, 
provided that the alcohol contained in the finished product is entirely of fermented origin. 

Still OFB (Paragraph 1) 
All products falling within CN codes 2204 and 2205 but not mentioned in Article 8 above, and 
products falling within CN code 2206, except other sparkling fermented beverages as defined in 
point 2 of this Article and any product covered by Article 2: 
— having an actual alcoholic strength by volume exceeding 1.2 % vol but not exceeding 10 % 
vol, 
— having an actual alcoholic strength by volume exceeding 10% but not exceeding  15 % vol, 
provided that the alcohol contained in the product is entirely of fermented origin. 
Sparkling OFB (Paragraph 2) 
All  products  falling  within  CN  code  2206  00  91  as  well  as  products  falling  within  CN  codes 
2204 10, 2204 21 10, 2204 29 10 and 2205 not mentioned in Article 8 above which: 
— are contained in bottles with ‘mushroom stoppers’ held in place by ties or fastenings, or they 
have an excess pressure due to carbon dioxide in solution of three bar or more, 
— have an actual alcoholic strength by volume exceeding  1.2  % vol, but not exceeding  13  % 
vol, 
—  have  an  actual  alcoholic  strength  by  volume  exceeding  13%,  but  not  exceeding  15  %  vol, 
provided that the alcohol contained in the product is entirely of fermented origin. 

Fermented 
Beverages other 
than  Wine  and 
Beer (OFB) 
(Article 12) 

All products of an actual alcoholic strength by volume exceeding 1.2% vol, but not exceeding 22 
% vol and falling within CN codes 2204, 2205 and 2206 but not covered by Articles 2, 8 and 12. 

Intermediate 
Products 
(Article 17) 

(IP) 

2.  Notwithstanding  the  provisions  of  Article  12,  Member  States  may  treat  as  an  intermediate 
product  any  still  fermented  beverage  falling  within  the  scope  of  Article  12  (1)  which  has  an 
actual  alcoholic  strength  exceeding  5.5  %  vol  and  which  is  not  entirely  of fermented  origin, 
and  any  sparkling  fermented  beverage  falling  within  the  scope  of  Article  12  (2)  which  has  an 
actual alcoholic strength exceeding 8.5 vol. and which is not entirely of fermented origin. 

Ethyl  Alcohol 
(ET) 
(Article 
20) 

— all products with an actual alcoholic strength by volume exceeding 1,2% volume which fall 
within CN codes 2207 and 2208, even when those products form part of a product which  falls 
within another chapter of the CN, 
—  products  of  CN  codes  2204,  2205  and  2206  which  have  an  actual  alcoholic  strength  by 
volume exceeding 22 % vol, 
— potable spirits containing products, whether in solution or not. 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s analysis of EBTI database (accessed in February 2017). 

The  misalignment  between  the  CN  and  the  excise  duty  classifications  may  cause  a  certain 
degree of complexity in the categorisation of certain products. For example, an aromatised wine 
product  (AWP)  coded  CN  2205  may  be  taxed  according  to  three  different  categories,  i.e. 
Articles 8, 12 or 17 depending on the addition of alcohol, the overall strength, and its specific 
denomination.  Similarly,  a  ‘mixed  drink’  may  be  subject  to  Articles  12,  17  or  20  depending, 
again, on the alcohol origin and blend, the strength, and other factors.       

For  the  purpose  of  movement  and  monitoring  within  the  EU,  excise  goods  are  given  a 
harmonised  Excise  Product  Code  (EPC).  The  EPC  are  based  on  the  tax  categories  described 
above, but do not fully comply with them. In particular, in the EPC system wine and OFB are 
merged  (the  distinction  between  still  and  sparkling  products  is  maintained),  which  may  be  a 
source  of  ambiguity  (discussed  in  Section  2.1.5.3).  Secondly,  ethyl  alcohol  and  spirits  falling 
under Article 20 are split into four EPC, as follows:     

  B000 -  Beer; 
  W200 - Still wine and still fermented beverages other than wine and beer; 
  W300 - Sparkling wine and sparkling fermented beverages other than wine and beer; 
 
I000 - Intermediate products; 
  S200 -   Spirituous beverages; 

110 

 
 
 
 
 
 
 
 
 
 
  S300 -   Ethyl alcohol; 
  S400 -   Partially denatured alcohol; 
  S500 -   Other products containing ethyl alcohol. 

For the reasons described above, the correspondence between EPC and CN codes is ‘many-to-
many’  i.e.  there  can  be  several  CN  codes  for  the  same  Excise  Product  Code  or  vice  versa.58 
Table  8  below  summarises  the  possible  correspondences  (not  exhaustive)  between  the  two 
systems, highlighting the cases where multiple correspondences are possible. In most cases, the 
correspondence is straightforward, nonetheless it is interesting to note that beverages under CN 
2206 00 39 (‘other sparkling OFB’) may correspond to five different EPC, and similar degree of 
ambiguity can be found with various other CN 2206 products and – to a lesser extent – CN 2205 
and CN 2204 products.     

Table 8 – The multiple correspondences between CN and EPC59  

CN headings / subheadings 

Excise product codes 

B000 

W200 

W300 

I000 

S200 

S300 

S400 

2203 

2204 10 and  

2204 29 10 

2204 21 06 - 2204 21 09 

2204 21 11 - 2204 21 84 and 

2204 29 11 - 2204 29 84 and 

2204 30 

2204 21 85 - 2204 21 91 and 

2204 29 85 - 2204 29 91 and  

2204 21 86 - 2204 21 91 

2204 21 92 and 

2204 29 92 

2204 21 93 - 2204 21 98 and 

2204 29 93 - 2204 29 98 

2205 10 10 and 

2205 90 10 

2205 10 90 and 

2205 90 90 

2206 00 10 and 

2206 00 51 and 

2206 00 81 

2206 00 31 

2206 00 39 

2206 00 59 and 

2206 00 89  

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

58   DG TAXUD, ‘Functional Excise System Specifications (FESS)’, version 3.65-EN, 16.09.2014. 
59   EPC  S500  is  not  displayed  since  it  refers  to  products  that  does  not  fall  in  the  CN  22  Chapter’s  Headings  for  alcoholic 

beverages and spirits that are relevant in this Study.    

111 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
CN headings / subheadings 

Excise product codes 

B000 

W200 

W300 

I000 

S200 

S300 

S400 

2207 10 

2207 20 

2208 20 - 2208 70 and  

2208 90 11 - 2208 90 78 

2208 90 91 

2208 90 99 

X 

X 

X 

X 

X 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s analysis of FESS-Appendix B.Note: CN headings / subheadings as in Regulation 2016/1821. 

Finally,  it  is  worth  highlighting  that  the  EU-level  tax  classification  rules  are  sometimes 
complemented by national-level rules. These may regard the establishment of non-harmonised 
taxes for specific categories of products like the so-called ‘pre-mix’ or ‘alcopop’ tax in FR and 
the  Romanian 
DE;  or  MS-level  distinctions  within  harmonised  categories,  such  as 
differentiation between cider & perry and other OFBs; or additional levies for products above a 
certain strength, etc. These specificities are based on domestic definition and criteria that add up 
to  the  harmonised  ones  and  may  create  additional  fiscal  sub-categories  that  are  relevant  only 
locally.        

112 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 8.  DRIVERS OF THE DYSFUNCTIONS IN THE CLASSIFICATION OF CERTAIN 
ALCOHOLIC BEVERAGES 

Driver 1: Lack of correlation between customs and fiscal classification  

For  legal  certainty  and  to  prevent  the  risk  that  the  attribution  of  a  certain  classification  is 
challenged  (and  fined)  by  customs  or 
tax  authorities  when  the  product  is  already 
commercialised,  economic  operators  may  opt  to  apply  for  a  BTI.  These  are  classification 
decisions  issued  by  the  customs  authorities  of  any  Member  State  and  they  are  binding 
throughout the EU for a period of normally 3 years. For products of dubious classification, such 
as  certain  new  products  or  borderline  products,  BTIs  represent  a  practical  solution  to  avoid 
disparities  of  treatment and  ensuing  disputes  with  customs  authorities. However,  since  the tax 
classification  is  determined  by  the  CN  code,  BTIs  may  also  become  a  source  of  controversy 
between countries and between economic operators.  (See Annex 7) 

Attempts  to  resolve  excise  classification  issues  through  legal  interpretation  of  the  CN  codes 
have  not  proved  effective  so  far.  Of  the  nearly  1 000  active  BTIs  for  alcoholic  beverages, 
approximately  50%  of  them  concern  products  falling  into  'borderline'  product  category.  The 
database  maintained  by  DG  TAXUD  provides  an  overview  of  the  areas  where  classification 
ambiguities prevail. In particular: 

  OFB, other than cider and perry (CN 2206 0039 and CN 2206 0059), alone account for a 

quarter of all BTIs, nearly as many as beer, wine and all OFB altogether. 

  There are also frequent BTIs in the area of aromatised wine product below 18% vol (CN 

2205 1010), which is another area of accelerated innovation. 

  The high concentration of BTIs in categories like other spirituous beverages (CN 2208 
9069) and liqueurs and cordials (CN 2208 7010) may be partly explained by borderline 
products, e.g. certain ‘mixed drinks’ that did not manage to obtain a more favourable CN 
2206 classification. 

BTIs  apart,  there  are  mismatches  within  the  classification  issue  that  relates  to  Excise  Product 
Code  (EPC).  EPC  are  required  for  EMCS,  the  computerised  system  for  monitoring  the 
movement of excise goods under duty suspension in the EU. In the case of imports from third 
countries,  the  EMCS  makes  use  of  two  distinct  product  classifications:  (i)  EPC  and  (ii)  the 
customs  CN  code.  EPC  and  CN  codes  have  different  origins  and  purposes,  therefore  the 
categorisations and the definitions used do not fully match. An EPC for each product category 
defined  in  the  Directive  is  laid  down  in  Regulation  684/200960.  The  correspondence  between 
EPC and CN codes could be described as ‘many to many’ i.e.: (i) there can be several CN codes 
for the same EPC; or (ii) there can be several EPC for the same CN code61. In most cases, the 
correspondence is straightforward, nonetheless it is interesting to note that beverages under 2206 
00 39 (‘other sparkling OFB’) may correspond to five different EPC, and similar situations can 
be  found  with  all  other  2206  products  (OFB)  and  –  to  a  lesser  extent  –  some  2205  (e.g. 
vermouth)  and  2204  (e.g.  wine  of  fresh  grapes)  products.  'Still  wine'  and  'still  fermented 
beverages'  share  the  same  EPC,  which  is  also  the  case  for  sparkling  wine  and  sparkling 
fermented  beverages.  The  lack  of  a  separate  EPC  for  OFB  is  not  ideal  for  market  monitoring 

60  

61  

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, OJ L 197, 29.7.2009, 
p. 24–64 
DG TAXUD, “Functional Excise System Specifications (FESS)”, version 3.65-EN, 16.09.2014. 

113 

 
 
 
 
                                                 
 
purposes  or  for  MS  which  have  a  differential  tax  treatment.  Furthermore  the  misclassification 
could result in the incorrect calculation of excise duty due and the financial guarantee required. 

Driver 2: Unclear legislation for products manufactured using new technologies 

Cider, perry, fruit wines, mead, etc. are agricultural products with a traditional origin, especially 
in Northern and Central Europe. These traditional fermented products were the target of Article 
12  of  the  Directive  as  per  CJEU  jurisdiction.  Article  12  is  less  strict  than  for  other  alcoholic 
beverages as this reflected the variety of national product practices for such beverages and the 
absence  of  a  harmonised  product  definition  and  production  rules  that  exist,  for  example,  for 
wine and spirits. 

The classification issues within the OFB category are essentially driven by the introduction of 
new  production  technologies  and  practices  and  the  related  development  of  products  departing 
from the concept of ‘traditional fermented products’ for which the Article 12 and the category of 
OFB were conceived.  

Overall, the problematic practices examined are of two main kinds:  

(i) 

the use of an alcoholic base that has lost its essential fermented character 

The fermented base used to produce an alcoholic beverage can be processed in various ways in 
order  to  obtain,  among  other  things,  the  desired  strength  and  a  neutral  or  partly  neutral 
organoleptic  character.  These  are  accepted  processes  -  although  with  restrictions  for  certain 
types  of  beverages  –  that  are  intended  to  optimise  and  stabilise  the  taste  and  smell  of  the 
product, to compensate for the effects of weather and other crop-affecting events, as well as to 
innovate and develop products more in line with consumer expectations. These processes alter 
the  fermented  base  through  holding  back  or  passing  of  some  compounds  in  the  beverage, 
allowing  partial  dehydration  (concentration),  partial  dealcoholisation,  tartaric  stabilization,  the 
adjustment  of  acidity  and  pH,  reduction  of  the  concentration  of  certain  organic  acids; 
management of dissolved gas, etc. There are different types of techniques that are used alone or 
in  combination,  in  the  production  of  a  vast  range  of  fermented  beverages.  There  is  no 
standardised description of these novel techniques that are at the moment, in  most cases, only 
generically  defined.  In  this  sense,  they  lend  themselves  poorly  to  become  subject  to  any 
regulatory provisions. 

(ii) 

the addition of alcohol of distilled origin and other additives to a fermented beverage.  

The addition of distilled alcohol is a well-established practice for several types of special wines 
and  other  traditional  fermented  beverages,  and  as  such  is  regulated  in  sectoral  legislation. 
However, alcohol is also added to mixed drinks with a fermented base to increase their strength. 
The  economic  rationale  is  that  alcohol  from  distillation  is  generally  cheaper  to  produce  than 
from  fermentation,  and  the  addition  of  alcohol  achieves  the  desired  final  strength  in  an  easier 
and more flexible way. Directive 92/83/EEC does not clarify the amount of alcohol of distilled 
origin that can be added to a fermented base before the tax category changes. Similarly, the CN 
2206 heading admits products not entirely of fermented origin62, but the permitted amount is not 

62  

The  explanatory  notes and  classification  opinions adopted  by the  HS  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.’ 

114 

 
 
 
 
                                                 
specified63, and the jurisprudence in this area (i.e. the above mentioned C-150/08 case) did not 
establish  any  straightforward  criteria.  As  a  result,  national  customs  administrations  adopted 
different approaches to the classification of these products, combining objective criteria such as 
the share of distilled alcohol in volumetric terms or in terms of its contribution to the final ABV, 
and the subjective criteria laid down in CNEN note 2206 00. To the extent the differential in the 
tax  rates  applied  to  Articles  12,  17  and  20  products  is  high,  there  remains  an  incentive  for 
economic operators to exploit this ambiguity. 

63  

When  goods  are  prima  facie  classifiable  under  two  or  more  headings,  the  CN  rules  require  that  classification  is 
effectuated 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’. 

115 

 
 
 
                                                 
ANNEX 9.  TAX, AFFORDABILITY AND CONSUMPTION 

To estimate the nature and the magnitude of the adverse effects potentially caused by the above 
classification  uncertainties,  it  is  necessary  to  consider  at  first  the  dynamics  of  the  alcoholic 
beverage  markets,  including  both  the  supply  and  the  demand  side.  Needless  to  say,  the 
mechanisms  underlying  this  market  are  highly  complex  and  the  dynamics  vary  across  market 
segments  –  in  terms  of  both  ‘type’  of  beverage  and  price  segment  –  and  across  geographical 
markets (i.e. consumption habits and consumer preferences).  

(iii) 

the  possible  general  correlation  between 

This  annex  reviews  in  particular:  (i)  the  mechanism  of  substitution  across  products  and  its 
connection with price levels; (ii) the effects of excise duty and its variation on consumer prices; 
and 
level,  affordability  and 
demand/consumption. The Study examined these mechanisms through an econometric analysis 
based  on  a  combination  of  IWSR  market  data  with  tax  levels  and  revenue  data  (Excise  Duty 
Tables),  also  integrating  other  variables  drawn  from  Eurostat  and  WHO  GISAH.  The  Study 
triangulated  the  results  with  the  results  of  similar  exercises  from  the  economic  literature,  and 
with the qualitative assessments collected from the stakeholder consultation.    

tax 

  Cross-product  substitution.  This  is  conventionally  measured  through  the  ‘cross-price 
elasticity’. When this variable is positive, products are substitutes and the increase of price 
in  one  category  results  in  an  increased  consumption  of  another  category.  When  values  are 
negative, products are complementary and follow the same trends (possibly influenced by an 
external  third  factors).  When  the  correlation  is  not  statistically  significant,  the  analysed 
products are probably independent of each other.   

 

The latter is frequently the outcome that can be found in the literature that tried to examine 
the  cross-price  elasticity  of  alcoholic  beverages,  which  generally  returns  inconclusive  and 
statistically weak  evidence  (see  Box  4).  In  practice,  no clear  and  robust  substitution  effect 
induced by price variations can be observed. In fact, substitution can be more substantially 
driven  by  factors  other  than  price,  and  connected  to:  socio-demographic  and  lifestyle 
changes, marketing strategies, awareness-raising campaigns, national regulatory frameworks 
on labelling, commercialisation, and drinking etc. The list of variables can be very long and 
differs across contexts, so eventually the economic research has progressively abandoned the 
econometric  approach  based  on  cross-price  elasticity.  Moreover,  it  has  been  observed  that 
price levels of different categories of products are often positively correlated. When prices 
fluctuate coherently for all products and nonetheless the level of demand varies, this would 
further  confirm  that  consumption  patterns,  including  substitution  across  products,  is 
prevalently determined by other factors. 

Box 4 – Selected excerpts from the literature review on cross-price elasticity for alcoholic beverages 

A  first  review  of  estimates  of  cross-price  elasticities  in  alcoholic  products  conducted  in  early  2000s64 
showed  a  wide  range of estimates  of different  sign,  implying disagreement  on whether  beer, wine  and 
spirits are complements or substitutes, and stressed the importance of extraneous factors, such as changes 
in consumer tastes and preferences. Still, the report concluded that the balance of evidence suggests that 
the drinks are substitutes, although cross-elasticities estimates have to be regarded with caution.  

More recently, Meng et al. (2014) attempted to estimate the cross-price elasticities of off- and on-trade 

64  

Custom Associates Ltd, ‘Study on competition between alcoholic drinks’, 2001. 

116 

 
 
 
 
 
 
 
 
 
 
                                                 
beer,  cider,  wine,  spirits  and  ready-to-drinks  in  the  UK  by  applying  a  pseudo-panel  approach  to  the 
cross-sectional  data  on  private  households’  expenditures.65  Only  6  out  of  90  estimated  cross-price 
elasticities were statistically significant and the suggested substitution and complementary relationships 
were very difficult to explain (46 estimates had a positive signs and 44 a negative one).  

A  new  study  using  cross-sectional  data  from  the  2013  Australian  arm  of  the  International  Alcohol 
Control survey employed a Tobit model approach to estimate cross-price elasticities of 11 categories of 
beverage,  comprising  on-  and  off-premise  separately  for  regular  beer  (full  strength),  low-mid  strength 
beer,  bottle  wine,  spirits  and  ready-to-drinks,  and  off-premise  cask  wine.66  A  significantly,  positive 
relationship  was  detected  between  the  prices  of  off-premise  beverages  with  demand  for  the  same 
beverage  on-premise,  while  the  cross-price  elasticities  among  different  beverage  categories  provided 
again indecisive results: very few statistically significant estimates (8 out 100) and a mix of positive and 
negative signs (49 and 51, respectively).  

Given the above challenges, other studies on excise duties on alcoholic beverages excluded cross-price 
effects, which were regarded of secondary importance to the own-price effect.67 

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

The Study tested the cross-price elasticity for ‘borderline’ categories of products, through a 
variant of the model used to estimate the own-elasticity of individual categories of product. 
In  particular,  Economisti  Associati  tried  to  estimate  if  and  how  mixed  drinks,  ‘borderline’ 
ciders,  and  ‘borderline’  IP  showed  clear  substitution  correlations  with  other  products.  In 
some  cases,  a  very  small  complementary  correlation  was  registered,  suggesting  that  other 
factors  (such  as  the  effect  of  the  economic  crisis,  the  introduction  of  certain  national 
regulations, the impact of information campaign etc.) might have simultaneously influenced 
the  level  of  consumption  of  different  product  categories,  regardless  of  price.  Overall,  the 
outcome was not statistically significant, so no substitution could be demonstrated. 68  

The above considerations should not be interpreted as a denial of the substitutability of all 
alcoholic  beverages.  In  fact,  this  assumption  is  inter  alia  confirmed  by  certain  marketing 
strategies, which increasingly abandon the approach ‘per class of product’ to adopt the ‘per 
consumption  occasion  /  modality’  perspective  (aperitif,  refreshment,  RTD,  etc.).  These 
complex marketing mechanisms, and their degree of success in moving consumers from one 
type  of  beverage  to  another,  are  outside  of  scope  of  this  Study.  For  the  purpose  of  this 
analysis,  the  key  message  is  that  a  certain  level  of  cross-products  substitution  cannot  be 
systematically predicted by a variation in price.                   

65   Meng, Y. et al., ‘Estimation of Own and Cross Price Elasticities of Alcohol Demand in the UK. A Pseudo-panel Approach 

Using the Living Costs and Food Survey 2001-2009’, Journal of Health Economics, Vol. 34, 2014. 

66   Jiang H. J., Livingston M., Room R., Callinan S., ‘Price elasticity of on- and off-premises demand for alcoholic drinks: a 

Tobit analysis’, in Drug and alcohol dependence, 2016. 

67   London Economics (May 2010), Study analysing possible changes in the minimum rates and structure of excise duties on 

alcoholic beverages.  

68    The  very  high  correlation  between  prices  across  categories  of  product,  which  inflates  the  standard  errors  in  multiple 
regressions (the ‘multicollinearity’ issue), and the fact that the model leaves out several independent, explanatory variables 
(the  so  called,  ‘omitted  variable  bias’)  do  not  allow  firm  conclusions  about  cross-price  elasticities  to  be  made.  In  the 
statistical  model  with  fixed-effects  at  the  product  level,  which  allows  for  the  controlling  of  time-invariant  unobserved 
heterogeneity  (e.g.  consumer  preferences  across  products  stable  over  time),  ten  out  16  cross-price  elasticities  were 
statistically  significant.  However,  this  model  is  weak  in  dealing  with  time-variant  unobserved  factors  at  the  product  level 
(e.g.  changes  in  consumer  tastes  over  time  that  are  different  across  product  categories)  and  the  results  might  be  biased. 
Indeed, the statistical significance disappears when the HAC standard errors (heteroscedasticity and auto-correlation robust 
standard errors) are used, which allows accounting for serially correlated errors likely due to the previous omitted factors 
(e.g. consumer preferences across product categories that slowly change over time). 

117 

 
 
 
 
 
 
 
                                                 
  The impact of excise duty on demand. From the above it derives that excise duty – that is 
one  of  the  determinants  of  price  –  cannot  have  a  statistically-significant  correlation  with 
cross-product  substitution.  In  other  words,  at  a  systemic  level,  Economisti  Associati  have 
not  observed  a  clear  relationship  between  the  tax  rate  applied  on  the  target  classes  of 
products and the level of consumption of competing products. This statement requires two 
important  qualifications:  (i)  despite  the  lack  of  a  general  relationship,  under  specific 
circumstances the variation of excise duty level can still have profound market effects; and 
(ii) as the results of this model show, despite the lack of a robust estimate for the cross-price 
elasticity,  the  ‘own-elasticity’  of  specific  categories  of  products  can  be  estimated  with  a 
certain degree of precision. 

With regard to the first point, the introduction of the ‘alcopop’ tax in Germany is a classical 
example  of  how  taxes  can  indeed  have  a  profound  impact  on  substitution.  This  case, 
described in more detail in Box 5, was evidently caused by the very high level to which the 
tax  was  set  and  the  fact  that  other  potentially  competitive  products  (malt  and  wine-based 
mixed  drinks)  were  not  targeted.  However,  in  various  other  circumstances  a  significant 
increase of the excise duty applied to a specific category did not necessarily lead consumers 
towards other products. For instance, in 2013, the excise duty on beer in France increased by 
160%, but the volume of sales continued to grow and no relevant changes were observed in 
other product categories.69 

Box 5 – 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 (see Figure 1 below). 

The existence of a similar substitution effect has been confirmed by a study conducted in 2010 to assess the 
effects of the alcopops tax on alcohol consumption and beverage preference among adolescents in Germany.70 
Based  on  2003  and  2007  data  from  the  cross-sectional  survey  of  the  European  School  Survey  Project  on 
Alcohol and other Drugs (ESPAD), the study confirmed a partial substitution of alcopops by spirits and beer 
among 12–17-year-olds. 

69   There have been changes in the excise duty levels of other products as well but very modest and on a much smaller scale 

than for beer.  

70   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. 

118 

 
 
 
              
 
 
 
 
 
                                                 
Figure 4 - Indexed consumption of alcoholic beverages in Germany (in ‘000 hectolitres, 
2001-2016) 

110

105

100

95

90

85

80

300

250

200

150

100

50

0

s
k
n
i
r
d

d
e
x
M

i

2001

Beer

2002

2003

2004

2005

2006

Spirits

Wine

All products

Mixed drinks

Source:  Economisti  Associati,  "Study  on  Council  Directive  92/83/EEC  on  the  structures  of  excise  duty  on 
alcohol and alcoholic beverages"; author’s elaborations on IWSR data.  
Note: For better readability the trend of mixed drink is displayed on a separate scale (right vertical axis).   

Secondly,  the  results  of  this  econometric  analysis  allowed  us  to  estimate  with  sufficient 
degree  of  reliability  the  impact  of  excise  duty  variations  on  the  demand  of  certain  target 
categories of products. The exercise required two steps. The first step consisted in estimating 
the ‘pass-through’ effect of taxes on price, i.e. the average change of price level caused by a 
variation  of  excise  duty  rates  (inclusive  of  the  VAT  on  the  excise  duty).  The  impact  on 
prices resulted more than proportional in the case of ‘borderline’ IP, cider, as well as various 
other  non-target  products;71  it  is  instead  less  than  proportional  for  most  of  the  IP  products 
analysed and spirit-based mixed drinks.72 In the case of mixed drinks with a fermented base 
the relation observed is not statistically robust, i.e. it is not possible to predict the effect on 
price of a variation in the excise duty rate. This result is not surprising, given the generally 
short life-cycle of these products and the importance played by marketing strategies. So, for 
analytical purposes Economisti Associati assumed a conventional pass-through rate of 1 (i.e. 
a ‘full pass-through’). 

The  second  step  consisted  in  estimating  the  own-elasticity  of  the  demand  for  the  target 
categories  of  product,  which  in  a  nutshell  is  a  measure  of  the  variation  of  consumption 
expected  when  the  price  changes.  Predictably,  in  all  cases  analysed  the  model  returned 
negative  coefficients,  i.e.  an increase  in  price would  determine  a  reduction  in  the demand. 
Certain  categories  like  ‘borderline’  IP  and  mixed  drinks  with  a  fermented  base  turned  out 
very  elastic,  with  the  estimated  drop  in  consumption  much  greater  than  the  corresponding 
price  variation.  In  some  cases,  the  statistical  robustness  of  the  coefficient  was  lower, 
including  for  mixed  drinks,  so  a  certain  variability  exists  in  the  reaction  of  consumers  to 

71   An increase by one EUR in the excise duty per litre has been estimated to translate into a change of the retail price per litre 
of  EUR  1.33,  EUR  1.73,  and  EUR  1.14  for  ‘borderline’  IP,  ‘borderline’  ciders,  and  various  other  non-target  products, 
respectively.  

72   The  pass-through  factor  has  been  estimated  at  EUR  0.65  and  EUR  0.28  for  IP  products,  such  as  fortified  wines  and 

vermouths, and spirit-based mixed drinks, respectively.  

119 

 
 
 
 
 
 
                                                 
 
 
price  change,  which  can  be  again  explained  by  exogenous  factors  like  the  impact  of 
marketing and the volatility of these products. 73        

  Tax, affordability and consumption.  According to the World Health Organisation (WHO) 
database, the total alcohol per capita74 consumption in Europe has decreased by -10.4% from 
2007 levels. This trend is  confirmed by the decline in the sales of alcoholic beverages  per 
capita in the EU that Economisti Associati estimated based on IWSR data.75 Accordingly, a 
decline of -4% was registered between 2010 and 2016, with an annual average reduction of 
about  -0.7%.  This  reduction  can  be  barely  ascribed  to  a  reduced  average  affordability  of 
alcoholic beverages. The share of disposable income needed to purchase a fixed bundle of 
alcoholic  beverages  remained  largely  stable,  recording  a  marginal  increase  from  1.73%  in 
2010  to  1.77%  in  2015.76  The  reason  behind  the  stability  of  this  ratio  is  that  the  average 
income growth in that period (+2.4% annually) largely kept pace with the average growth in 
the price level of alcoholic beverages (+2.8% annually).  

Using  a  more  accurate  measure  of  the  affordability,  which  considers  how  the  price  of 
alcohol has evolved as compared to the price of all other consumers’ goods, i.e. the Relative 
Alcohol  Affordability  Index  (RAAI)77, 
the  relationship  between  affordability  and 
consumption is even weaker. As shown in Figure 5, the RAAI has risen over the last decade, 
driven  by  higher  disposable  income,  whereas  the  indexed  consumption  declined,  in  an 
apparently unrelated manner.  

73  

74  

75  

76  

77  

Own-price  elasticities  for  different  groups  of  alcoholic  beverages  have  been  estimated  by  applying  two  common 
techniques for panel regressions, i.e. pooled ‘ordinary least squares’ (OLS) and ‘fixed effects’. Estimates achieved for 
different types of beverages, which have to be interpreted as the percent change in demand resulting from a 1% increase 
of  their  retail  price,  are  the  following:  -1.15%  and  -2.99%  for  mixed  drinks  with  a  fermented  base;  (ii)  -2.45%  and  -
2.47% for ‘borderline ciders’, (iii)  -1.74%  and -3.23% for ‘borderline’ IP, (iv) and  -1.51% and  -1.77% for other non-
target  products.  A  comparatively  lower  degree  of  statistical  significance  was  found  in  the  case  of  OFB  groups  of 
product; thus, in the case of ‘borderline’ ciders, the lower end of the range has been set at 1.3%, in line with the findings 
of  the  existing  empirical  literature  (see,  Stockwell,  T.M.  et  al.  (2012),  ‘Does  Minimum  Pricing  Reduce  Alcohol 
Consumption? The Experience of a Canadian Province’, Addiction, Vol. 107, pp. 912-920; and Meng, Y. et al. (2014), 
‘Estimation  of  Own  and  Cross  Price  Elasticities  of  Alcohol  Demand  in  the  UK.  A  Pseudo-panel  Approach  Using  the 
Living Costs and Food Survey 2001-2009’, Journal of Health Economics, Vol. 34, pp. 96-103).  
According to WHO, alcohol per capita (15+) consumption of pure alcohol is calculated as the sum of beverage-specific 
alcohol consumption of pure alcohol (beer, wine, spirits, other) from different sources. It is measured as litres of pure 
alcohol per person per year. 
The  per  capita  consumption  is  calculated  as  the  ratio  between  the  total  volume  of  alcohol  in  litres  consumed  across 
Europe (from IWSR) for each category and the total national population (from Eurostat).  
The  bundle  of  alcoholic  beverages  is  based  on  the  per  capita  consumption  of  the  five  main  categories  of  alcoholic 
beverages consumed in 2010 in EU, which included: (i) 70 litres of beer, (ii) 28 litres of wine, (iii) 5 litres of spirits, (iv) 
0.6 litres of mixed drinks, and (v) 2 litres of cider.  
We  have  used  here  the  definition  of  the  index  provided  by  the  UK  National  health  Service  (See:  NHS  Information 
Centre,  ‘Statistics  on  Alcohol  England,  2017  –  Appendices’,  the  NHS  Information  Centre).  The  index  has  been 
recalculated at EU-level, based on the Eurostat’s harmonised indices of consumer prices and adjusted gross disposable 
income of households.   

120 

 
 
          
 
 
                                                 
Figure 5 - Indexed trends in alcohol affordability and consumption (2005=100) 

130

120

110

100

90

80

70

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

RAAI

Alcohol Consumption

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages"; author’s elaboration based on EBTI database (accessed in February 2017). 

There  are  evident  limitations  to  this  analysis,  namely:  the  fact  that  it  looks  only  at  broader 
systemic trends, it does not distinguish among specific socio-economic groups, and it does not 
distinguish specific ‘niches’ of products that might have become significantly more affordable 
(e.g. the renowned issue of ‘white cider’ in the UK).78 A micro-level perspective would be more 
informative  in  this  respect,  but  at  that  level  it  is  national/regional  and  not  EU  policies  and 
measures  that  matter.  So,  for  the  purpose  of  estimating  the  impact  attributable  to  Directive 
92/83/EEC, the systemic-level analysis seems more pertinent.          

The statistical analysis of the relationship between RAAI and per capita consumption suggests a 
positive relation, but with a small coefficient. In a nutshell, assuming all other factors neutral, a 
1%  decrease  in  alcohol  consumption  may  require  a  7%  decrease  in  the  affordability  index. 
Under the strong assumptions that: (i) households’ disposable income grows at the same rate as 
the past 10 years (about 2% per year, on average), and (ii) the alcohol prices grow at the same 
pace  of  other  consumables  goods,  such  a  leap  in  the  affordability  index  would  require  an 
increase of the alcohol price by about 10%. Based on the IWSR data, the gross average price of 
alcoholic beverages in  2016 was about  EUR 3.90 per litre, thus, a  10%  increase will translate 
into an average increase in absolute terms of about EUR 0.40 per litre. With a conservative pass-
through of excise duty on price equal to 100%79, and considering that the average excise duty 
levied  on  alcoholic  beverages  is  EUR  0.68  per  litre80,  such  effect  on  price  would  require  a 
simultaneous increase of the excise duty rates by 57% (across all products in all MS).   

78   https://www.theguardian.com/lifeandstyle/2011/apr/17/cider-industry-protected-expense-alcoholics 
79   Our  estimates  of  pass-through  factor  for  different  categories  of  beverages  are  typically  higher  than  1.  These  results  are 
corroborated by the literature review. For instance, Sassi F. et al. (2103) conclude their meta-analysis of tax pass–through 
across different types of alcoholic beverages stating that: ‘[g]enerally, alcohol taxes are more than fully passed through to 
prices.’  (see,  Sassi  F.,  Belloni  A.,  Capobianco  C.,  ‘The  Role  of  Fiscal  Policies  in  Health  Promotion’,  OECD  Health 
Working Paper No. 66, 2013). According to a recent study commissioned by DG SANTE pass-through coefficients appear 
more mixed across MS (see: Rabinovich, et al., ‘Further study on the affordability of alcoholic beverages in the EU - A 
focus on excise duty pass-through, on-and off-trade sales, price promotions and pricing regulations’, RAND Europe, 2012). 
80   This value is based on the ratio between the total EU 28 revenue from excise duty on alcoholic beverage (EUR 35.6 bn) and 

the total volume of litres consumed (about 52 bn).     

121 

 
 
 
 
 
 
 
                                                 
Historically, there are no known examples of comparable tax increases ever applied to the entire 
alcoholic  beverage  market,  so  there  is  no  case-study  evidence  of  the  collateral  effects  of  a 
similar  fiscal  measure.  So,  the  above  should  be  considered  as  a  purely  theoretical  simulation 
whose  main  purpose  is  to  show  how  moderate  tax  increases  would  only  marginally  affect 
overall consumption, at systemic level.81   

The implication for the Study is that since the ‘borderline’ products have negligible impact on 
the affordability of alcohol (in systemic terms), they are unlikely to represent a huge threat to the 
general  public  health  policy  on  alcohol  control.  Of  course,  at  local  level,  certain  ‘borderline’ 
products may constitute a social problem (e.g. too affordable or appealing to young people and 
vulnerable social categories), and in this sense they call for localised solutions, as has happened 
already in various MS.         

81  

In principle, the whole matter can be seen the other way round, i.e. a simultaneous, significant reduction of tax rates may 
induce  an  increase  (or  slower  decrease)  in  the  overall  per  capita  alcohol  consumption.  This  assumption  is  certainly 
compatible  with  the  results  of  our  Study  as  well  as  of  other  researches  that  investigated  the  link  between  taxation  and 
demand (a relationship that is always mediated by the actual effects on retail prices). Some qualifications are nonetheless 
necessary:  (i)  the  dependent  variable  in  the  above  simulation  is  the  consumption  of  ‘pure  alcohol’,  so  the  conclusions 
cannot be immediately extended to specific categories of product, especially products with a generally low ABV like beer, 
cider  etc.;  (ii)  in  particular,  the  reduced  rates  applicable  in  some  MS  to  low-strength  products  may  encourage  the 
consumption of greater quantities, but this does not necessarily translate in an increase consumption of ‘pure alcohol’ (see 
Section  2.4  for  details);  (iii)  the  simulation  regards  a  generalised  variation  in  the  price  level,  not  only  a  segment  of  the 
market (as it is for instance the case with reduced rates for small producers, which – as discussed in Section 2.3 – concerns 
only a fraction of the overall EU market of alcoholic beverages).   

122 

 
 
 
 
 
 
 
                                                 
ANNEX 9A EXCERPT FROM ANNEX 6A OF THE EXTERNAL EVALUATION (BY RAMBOLL) 

4. EXAMPLES OF PRODUCTS DIFFICULT TO CLASSIFY  

In this section, on the basis of our research into reported cases of products difficult to classify, 
we present the main groups (types) of products which cause the most difficulties. As relevant, 
we discuss the outcomes and root causes separately, for each group.  

By  far,  the  highest  number  of  examples  and  the  ones  reported  to  have  the  most  damaging 
consequences  refer  to  products  which  are  at  the “border”  between  CN  classification 2206  and 
2208,  meaning  that  from  an  excise  perspective,  they  could  fall  in  either”  “Other  fermented 
beverages”; “Intermediate products” or “Ethyl Alcohol”  

4.1  READY-TO-DRINK  PRODUCTS  –  LOW  STRENGTH  FERMENTED  BEVERAGES  OR  MIXTURES 
(ALCO-POPS)  

One of the most common products reported as being difficult to classify falls under the category 
of ready-to-drink products (also known as alcopops). This study has collected examples of such 
reported issues in at least 8 Member States82  

In this category, products reported to be “difficult to classify” are normally between 4% and 7% 
ABV and consist of a fermented base with water, sugar, fruit juices, aromas and colorants.  

The  amount  and  proportion  of  alcohol  coming  from  different  origins  (i.e.  fermentation  v 
distilled) is not  material to  define this  category of products as  difficult to classify because the 
examples consist of products with various shares of fermented to distilled alcohol.  

Most examples provided were reported to contain alcohol of both fermented as well as distilled 
origin, although this was not a necessity. At least one example was reported to be based solely 
on  alcohol  of  fermented  origin  which  has  been  cleaned-up,  in  such  a  way  as  to  lose  its 
characteristics of a fermented alcohol  

Common to  these  products is that in the opinion of those reporting the examples the products 
had lost the taste, smell and appearance of a beverage produced from a particular fruit or natural 
product and that it had the appearance and characteristics of a spirit drink, being labelled to that 
effect.  

4.1.1 CLASSIFICATION  

While  in  some  Member  States,  they  are  considered  to  be  (and  taxed  as)  “Other  Fermented 
Beverages”  -  (W200),  sometimes  even  against  the  wishes  and  opinions  of  the  respective  tax 
administrations,  in  other  Member  States  they  are  taxed  as  “Ethyl  Alcohol”  /  “Spirituous 
Beverages” - (S200).  

The  excise  classification  described  above  follows  the  customs  classification  in  the  sense  that 
products described above would be considered to be and taxed as “Other fermented beverages” 
in countries where they are classified for customs purposes as falling within CN 2206 and taxed 
as “spirits” in those countries where, for customs purposes they fall under CN 2208.  

82   BE; DE; EE; FI; IE; PT; NL and UK 

123 

 
 
 
                                                 
4.1.2 CONSEQUENCES  

In all reported cases within this group of products, there is a clear difference between the excise 
taxes  applicable  when  these  particular  products  are  classified  as  W200  as  opposed  to  being 
classified as S200.  

Specifically, depending on the individual variables of each case (i.e. the actual alcohol content 
of the product and the country of taxation), the difference in excise tax (VAT excluded) ranges 
from 7.48 EUR83 / HL to 89.7 EUR/HL84 of finished product.  

In addition to the quantifiable difference in terms of applicable excise duty, economic operators 
interviewed  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 Member States).  

Finally,  another  negative  consequence  outlined  by  economic  operators  concerns  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  (Ready-To-Drink  products)  which  are 
based  entirely  on  alcohol  of  distilled  origin  (which  compete  on  the  same  market)  at  a 
severe competitive disadvantage (see point above on difference in taxation)  

  Secondly, it undermines the excise category itself (i.e. “Other Fermented Beverages”) by 
allowing  RTDs  to  benefit  from  taxation  at  the  same  level  as  fermented  beverages 
produced using traditional methods and natural fruits whose protection the category itself 
was supposed to benefit.  

Although not investigated within the scope of this study, the point of view of the consumer may 
also reveal a negative consequence if the expectations of consumers85 regarding these products 
are based on the assumption that they are based on spirits which have been pre-mixed to form a 
drinkable cocktail (as is the case with other categories of products difficult to classify86).  

4.1.3 LEGISLATIVE SOURCE OF THE PROBLEM AND POTENTIAL SOLUTIONS  

Due to the complexity of the problem and the similarities with products in other categories, this 
causes and solutions are treated separately in section 5.  

4.2 MEDIUM STRENGTH FERMENTED BEVERAGES OR MIXTURES (10-15%)  

Another  group  of  products  commonly  reported  as  being  difficult  to  classify  is  comprised  of 
medium strength alcoholic beverages with a fermented base. Although similar in nature to the 
issue of “alco-pops”, the products falling in this group deserve a specific analysis because some 
legal considerations as well as potential outcomes surrounding them are rather different.  

83     A ready to drink beverage of 5.5% alcohol in Estonia  
84   A ready to drink beverage of 5.5% alcohol in Belgium 
85    As investigating these aspects has fallen outside the scope of this study, this theory cannot be confirmed or infirmed in the      
context of this evaluation  
86   See examples of Mixtures of Fermented and Distilled alcohol at approx. 21% ABV 

124 

 
 
                                                 
Fewer examples of such products were reported to be difficult to classify, nevertheless they have 
been indicated as problematic products by the authorities of six Member States87.  

In this category, products reported to be “difficult to classify” are between 10% and 15% ABV, 
with most of the examples being around 14%-15%.  

Products  in  this  group  are  slightly  more  diverse  than  “alco-pops”.  However,  they  are  all 
manufactured  on  a  fermented  base  (either  wine  or  other  fruits),  some  of  them  being  enriched 
with distilled alcohol.  

Similarly to the ones described above, most examples provided were reported to contain alcohol 
of both fermented as well as distilled origin, although this was not a necessity. Common to these 
products is  that in  the  opinion of those reporting the examples  the products  had lost the taste, 
smell and appearance of a beverage produced from a particular fruit or natural product and that 
they had the appearance and characteristics of a spirit drink, being labelled to that effect.  

4.2.1 CLASSIFICATION  

In  the  cases  of  these  examples,  there  are  actually  three  potentially  applicable  excise 
classifications:  In  situations  where  CN  code  2206  is  applicable  the  choice  from  an  excise 
perspective  would  be  between  “Other  Fermented  Beverages”  (W200)  or  “Intermediate 
products” (I000), although, in practice W200 would apply most often. If the product would fall 
for customs purposes within CN 2208 and “Ethyl Alcohol” (S200) excise classification would 
apply.  

4.2.2 CONSEQUENCES  

One  of  the  reasons  for  grouping  these  examples  as  a  different  category  than  alco-pops  was  to 
showcase the difference in excise tax applicable to these products depending on interpretation of 
the provisions.  

In all reported cases within this group of products, there is a large difference between the excise 
taxes  applicable  when  these  particular  products  are  classified  as  W200  as  opposed  to  being 
classified as I000 or S200.  

Depending on the actual alcohol content of the product and the Member State where it is being 
sold,  the  difference  in  excise  tax  (VAT  excluded)  ranges  from  79.55  Euros  /  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.  

In addition to differences in terms of applicable excise duty, an important outcome reported in 
relation  to  these  examples  are  litigation  costs.  Given  the  monetary  impact  at  stake,  disputes 
between  tax  administrations  and  operators  in  this  area  are  more  likely  to  be  taken  to  court 
resulting in significant costs for both the administration as well as for the economic operators.  

Although  other  negative  consequences  were  not  specifically  mentioned  by  the  stakeholders 
which have reported these examples, an adverse impact on fair competition could exist, should 
these types of products be in direct competitors (or be marketed to be in direct competition) with 
higher taxed spirits (e.g. those falling under I000 and S200).  

87 DE; FR; HR; NL; PT; UK 

125 

 
 
                                                 
4.2.3 EXAMPLES AND VOLUMES CONCERNED  

One particularly illustrative example of products described above can be found in ECJ case C-
532/14 which concerns the excise tariff rate that is to be applied to alcoholic beverages that are 
based on fermented alcohol, known as Ferm fruit, to which distilled alcohol, sugar (syrup), milk, 
fats and various aromas are added. The alcohol percentage is in total 13.4%. At least 51% of the 
alcohol consists of fermented alcohol.  

The  fermented  alcohol  is  cleared  by  means  of  ultrafiltration  and  has  therefore  a  neutral  taste, 
color and smell. The Tax Court88 considered the beverage as a liqueur, to be classified under CN 
code 2208 7010, upon which the high excise rate of distilled alcohol is due.  

4.2.4 LEGISLATIVE SOURCE OF THE PROBLEM AND POTENTIAL SOLUTIONS  

Due to the complexity of the problem and the similarities with products in other categories, this 
causes and solutions are treated separately in section 5  

4.3 HIGH STRENGTH FERMENTED BEVERAGES OR MIXTURES (15-22%)  

The  highest  number  of  products  reported  by  stakeholders  to  be  “difficult  to  classify”  are 
beverages  based  on  fermented  alcohol  which  has  been  subject  to  certain  production  processes 
(e.g.  ultra-filtration)  or  mixtures  of  alcohol  below  21.9%  to  become  colourless  and  odourless. 
Most often, this alcohol base mixed with other flavours (or without) is then marketed as a low-
strength spirit.  

Products sharing these characteristics have been reported in at least six Member States as well as 
by numerous stakeholders in the context of this case study.  

The  description  of  this  kind  of  products,  alongside  the  legal  considerations  and  market 
distortions they cause is well illustrated by existing case law89.  

4.3.1 CLASSIFICATION  

In  situations  where  CN  code  2206  is  applicable  from  an  excise  perspective,  these  products 
would be categorised  as ”Intermediate products” (I000). If the product would fall  for customs 
purposes within CN 2208 an “Ethyl Alcohol” (S200) excise classification would apply.  

4.3.2 CONSEQUENCES  

In all reported cases within this group of products, there is a very large difference between the 
excise taxes applicable when these particular products are classified as I000 as opposed to being 
classified as S200.  

Assuming an alcoholic strength of around 21-22% and depending on the Member State where it 
is  being  sold,  the  difference  in  excise  tax  (VAT  excluded)  ranges  from  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  then  sold  in  Vodka  style  packaging  in  the  UK)  of  finished 
product.  

88 n.b. In the Netherlands 
89 e.g. ECJ cases: C-150/08; C-532-14; C-533-14; UK case EWHC 17 (Ch) Diageo North America, Inc & Anor v 

Intercontinental Brands; etc. 

126 

 
 
                                                 
A  court  decision  involving  one  of  the  products  described  within  this  section90  recognised  that 
the purpose of the product, at 22% was to benefit from lower taxation91.  

Additionally, the impact on competition has been highlighted by the case law as well as by other 
stakeholders interviewed in the context of the case study:  

  Firstly,  the  erosion  of  distinctiveness  of  the  higher  strength  spirit92  which  the  products 
described in this category seek to imitate creates a quantifiable loss for the producers of 
the drinks being taxed as 2208/S200.  

  Secondly, the aspect of confusion of the consumers would further damage the legitimate 

interests of the producers of the alcohols being taxed as 2208/S200.  

Litigation  results  in  significant  costs  for  economic  operators  which  will  seek  to  correct  the 
perceived unfair competition by these products.  

Similarly to the above categories, although not investigated within the scope of this study, the 
point  of  view  of  the  consumer  may  also  reveal  a  negative  consequence  if  the  expectations  of 
consumers regarding these products are based on the assumption that they are based on distilled 
rather than fermented alcohol93.  

4.3.3 EXAMPLES AND VOLUMES CONCERNED  

Below  are  just  a  few  additional  examples  of  these  types  of  products  sampled  from  Member 
States:  

Croatia:  An  alcoholic  drink  with  cherry  flavour  in  a  glass  bottle  of  500  ml  obtained  by  the 
fermentation  of  apple  juice  which  produced  13.05%  vol.  and  enriched  with  distilled  ethyl 
alcohol to the final alcohol content of 21%vol. 

Ireland: Different brands which are marketed to appear almost as whiskeys, having an alcohol 
concentration  of  22%,  often  made  of  cleaned-up  fermented  alcohol  base  to  which  distilled 
alcohol has been added.  

Ireland:  A  golden-brown  alcohol  beverage  at  21.9%  manufactured  using  wine,  sugar  and/or 
flavours. The apple wine corresponds to 51% bulk volume and 61% of alcohol content.  

United  Kingdom:  a  22%  ABV  product  in  a  red  get-up  reminiscent  of  vodka.  The  front  label 
includes  the  words  "Premium"  and  "Imperial  Blend".  The  back  label  states  in  relatively  small 
print that the product is "a versatile blend of premium fermented alcohol with vodka.  

Poland: Fermented beverages which have undergone filtration, fortified with distilled alcohol, to 
which flavours to change or strengthen smell or taste of the product have been added.  

Netherlands: ECJ case C-533/14 concerns a beverage called Ferm Fruit (the base drink) with an 
alcohol  percentage  of  16%.  This  beverage  is  prepared  with  sugar  syrup,  demineralized  water, 
apple  concentrate,  minerals  and  vitamins.  After  mixing,  pasteurization  takes  place  and  wine 
yeast  is  added,  as  a  result  of  which,  the  product  becomes  an  alcoholic  product.  The  alcoholic 

90 England and Wales High Court (Chancery Division) 
91 “Due to a favourable customs classification, a 22% ABV drink of this type would attract much less duty than spirits” 
92 E.g. Vodka, Whiskey, Rum, Gin, Advokaat, etc.  
93 As investigating these aspects has fallen outside the scope of this study, this theory cannot be confirmed nor infirmed in the 

context of this evaluation. 

127 

 
 
                                                 
product is cleared by means of, among other things, ultrafiltration and has, therefore, a neutral 
taste, color and smell. It does not contain distilled alcohol.  

4.3.4 LEGISLATIVE SOURCE OF THE PROBLEM AND POTENTIAL SOLUTIONS  

Due to the complexity of the problem and the similarities with products in other categories, this 
causes and solutions are treated separately in section 5.  

4.4 BEER TO WHICH ALCOHOL FROM DISTILLED ORIGIN IS ADDED  

Mixtures  of  beer  and  spirits  with  recognisable  increase  in  alcoholic  strength:  This  type  of 
product  has  been  identified  as  difficult  to  classify  by  two  stakeholders:  One  example  was 
provided  by  authorities  in  Portugal  while  another  example  was  provided  by  an  economic 
operator in the UK.  

In  both  cases,  the  beer  had  not  lost  its  character  as  beer,  but  had  rather  gained  a  distinctive 
flavour of the aromatic substance spirit added (Tequila and Whiskey respectively).  

The first example is a beer at 5.9% containing “water, malted barley, glucose syrup, corn, sugar, 
aromatic compounds (75% Tequila), citric acid, hop extract” while the second product is a beer, 
at 8% ABV, which has been matured for 12 months in a cask which previously had single malt 
whiskey stored within it. The beer grows in ABV, but is then diluted with beer until it reaches 
8.1% ABV.  

4.4.1 CLASSIFICATION  

The  excise  codes  applicable  in  this  situation  are  CN2203  and  CN2208  while  the  excise 
classification is, accordingly between “Beer” and “Ethyl alcohol”.  

4.4.2 CONSEQUENCES  

The difference of excise duty applicable depending on whether the product is classified as beer 
or ethyl alcohol is evident: in the two examples, it would range between approx. 52 EUR/HL (in 
PT)18 and 279.18 EUR/HL (in the UK).  

18 The estimation of financial risk is not accurate in this case, as it was not possible to calculate 
the excise duty which would be applicable to the product in question (a beer at 5.9% alcohol) 
because  the excise  duty  on  beer in  Portugal  is  expressed according  to  degrees  Plato.  As  such, 
this figure is estimation.  

The consequences of classifying such products go beyond the financial impact. In the case of the 
beer matured in whiskey casks, the tax warehouse in question (as well as some of its customers) 
had to adapt their authorisations as they were not allowed to hold / receive S200 products under 
suspension of excise duty, leading to high administrative costs and unexpected liability to pay 
tax resulting from releasing for consumption of the product in question.  

4.4.3 LEGISLATIVE SOURCE OF THE PROBLEM AND POTENTIAL SOLUTIONS  

Article 2 of the Directive only foresees products of 2203 to be beer (or “any products containing 
a mixture of beer with non-alcoholic beverages falling under CN2206”).  

In  the  examples  provided,  it  has  been  argued  that  CN  code  2208,  as  it  is  defined,  is  able  to 
capture,  as  ethyl  alcohol,  a  beer  to  which  only  an  0.1%  ABV  can  be  attributed  to  alcohol  of 
distilled  origin,  even  though  the  vast  majority  of  alcohol  is  sourced  from  the  fermentation  of 
malt.  

128 

 
 
While this study has absolutely no authority to judge whether a given (or claimed) classification 
is  correct  or  not,  from  the  examples  provided in  the  context  of  this  study,  we  believe  that  the 
current legislative framework is sufficient to provide an accurate determination of the products 
in question, and therefore we see no systematic weakness of the Directive as regards to this issue 
which would necessitate revision.  

Below,  we  outline  the  legal  considerations  which  we  would  deem  as  sufficient  for  an 
unequivocal judgement in these cases.  

As we recall the general rules for the interpretation of the CN (‘the general rules’), which appear 
in Part One, Section I A, of the CN, provide inter alia:  

‘Classification of goods in the [CN] shall be governed by the following principles:  

1. …  

2. …  

(b) Any reference in a heading to a material or substance shall be taken to include a reference to 
mixtures  or  combinations  of  that  material  or  substance  with  other  materials  or  substances.  … 
The  classification  of  goods  consisting  of  more  than  one  material  …  shall  be  according  to  the 
principles of rule 3.  

3. When by application of rule 2(b) or for any other reason, goods are prima facie classifiable 
under two or more headings, classification shall be effected as follows:  

(a)  The  heading  which  provides  the  most  specific  description  shall  be  preferred  to  headings 
providing a more general description. However, when two or more headings each refer to part 
only  of  the  materials  or  substances  contained  in  mixed  …  goods  …,  those  headings  are  to  be 
regarded  as  equally  specific  in  relation  to  those  goods,  even  if  one  of  them  gives  a  more 
complete or precise description of the goods;  

(b)  Mixtures  …  which  cannot  be  classified  by  reference  to  3(a),  shall  be  classified  as  if  they 
consisted of the material … which gives them their essential character in so far as this criterion 
is applicable.  

In  our  assessment,  and  without  prejudice  to  any  decisions  of  the  Member  States  and  of  the 
courts, we believe that the current legislative environment should be sufficient to determine the 
unequivocal classification of the products in question.  

4.5 WINE BASED DRINKS (FLAVOURED WINES AND APERITIFS)  

Several examples of wine based drinks were reported to be “difficult to classify”, highlighting 
two distinct issues:  

1.  The  first  group  of  examples  referred  to  wine  based  drinks  to  which  flavours  containing 
alcohol of distilled origin is added. According to the respondents reporting these products, the 
characteristics of these examples remain that of wine, and alcohol content is maximum 14%.  - 
Usually, the added alcohol (from distilled origin) content is between 0.5% and 1.2%.  

2.  Another  category  of  products  refers  to  flavoured  wines,  either  mixed  with  fruit  aromas, 
subject to crio-extraction but remaining below 15%.  

4.5.1 CLASSIFICATION  

129 

 
 
In  both  cases  the  products  described  will remain  for  customs  purposes  either  CN  2204  or  CN 
2205.  

However, the problems highlighted for the two types of products are different:  

1.  While  for  the  first  category  (of  wine  flavoured  with  the  addition  of  distilled  alcohol,  but 
below  15%),  some  countries  would  consider  the  same  product,  for  excise  purposes  as  W200 
(“Other  fermented  beverages”)  while  others  would  consider  it  as  I000  (“Intermediate 
beverages”).  

2. In the second category (those of flavoured wines, to which no distilled alcohol is added), they 
remain in the excise category of W200 (“Other fermented beverages”).  

4.5.2 CONSEQUENCES  

1. This particular example does not concern a difficulty to classify a product within one country, 
but the treatment of the same product in different Member States. As a result, this is mainly an 
internal market issue; the same producer has the product classified differently in different MS.  

2. In the second example, competitive distortions as a result of differing excise rates for products 
being  argued  to  compete  on  the  same  market  have  been  reported  to  be  the  most  important 
consequence. This relates to the treatment of certain products in France, these products would 
arguably  be  perceived  to  be  vermouths,  competing  on  the  market  of  aperitifs  but  classified  as 
W200,  in  the  detriment  of  competing  products  which  are  being  considered  to  be  I000.  In  this 
case, the financial difference, in terms of excise duty is approximately 185 EUR/HL (3,77 € / hl 
vs 188,41 €/hl).  

4.5.3 EXAMPLES AND VOLUMES CONCERNED  

The example concerned in the second scenario presented in this section refers to the treatment of 
a well-known and popular brand of vermouth in France  

4.5.4 LEGISLATIVE SOURCE OF THE PROBLEM AND POTENTIAL SOLUTIONS  

1.  In  the  first  set  of  examples,  the  issue  at  stake  was  that  Art  12  (1)  -  the  concept  of  entirely 
fermented origin is being interpreted differently. Furthermore - Art 17 (2) - where “Intermediate 
products” fall is interpreted differently by different Member States  

It was reported that, in some Member States, the addition of flavours with alcoholic content to a 
wine base product  is  possible without  the loss of the excise classification as  W200.  However, 
national  legislation  is  not  harmonized  in  this  respect,  leading  to  situations  where  the  same 
product  is  classified  as  an  intermediate  product  in  some  Member  States  and  as  a  fermented 
beverage in others. As an example, it was reported that in Spain, an addition of distilled alcohol 
to  wine  of  0.5%  would  be  permitted  without  changing  the  classification  for  excise  purposes, 
while in Italy, a threshold of 1.2% is applicable. In this situation, a product which may be “Other 
Fermented beverages” in Italy, will be an “Intermediate product” in Spain.  

The  Directive  should  be  clear  to  define  the  situation  of  adding  flavours  containing  alcohol  to 
wine.  In  order  to  have  uniformity  in  deciding  at  which  point  the  product  becomes  an 
intermediate product. To this respect the Directive should seek to clarify the notion of “entirely 
of fermented origin” within the understanding of Articles 8, 12(1) and 17. It should be noted that 
the problems reported in this section are different in their scope and nature than those reported 
under  the  sections  above,  and  a  solution  to  one  may  have  unintended  consequences  on  the 
evolution of the problems in the other category.  

130 

 
 
2.  The  legislative  source  of  the  issue  in  the  second  example  is  the  application  of  excise 
legislation  which  classifies  the  products  in  question19  as  such  in  spite  of  arguably  sharing 
similar  characteristics  and  competing  on  the  same  market.  No  solution  to  this  particular  issue 
can be found within the current legislative context.  

4.6 OTHER ISSUES  

Finally, an inconsistency of the Directive has been reported in the context of this evaluation, it 
refers  to  the  manner  in  which  sparkling  wine  is  defined  for  excise  and  customs  purposes: 
Sparkling wine for excise purposes, defined in Article 8 (2) indent 1 requires a pressure of 3 bar 
or more while the equivalent CN codes require more than 2.5 bar. This mismatch requires more 
than 2.5 bar. This mismatch between classifications should be resolved. 

131 

 
 
 
 
ANNEX 10.  REDUCED RATES FOR OTHER SMALL PRODUCERS 

IMPLEMENTATION OF REDUCED RATES FOR SMALL BREWERIES AND DISTILLERIES ACROSS MS  

The  majority  of  MS  –  23  out  of  28  –  have  opted  in  to  the  reduced  rates  for  small  breweries. 
Thirteen out of these 23 MS have adopted the maximum threshold allowed by the Directive, the 
remaining  10  a  lower  one,  from  as  low  as  6 000  hl/year  in  Estonia,  up  to  150 000  hl/year  in 
Finland.  Eleven  MS  have  established  a  bracket  system,  with  two  to  five  brackets,  i.e.  they 
provide a larger discount for very small breweries compared to the one granted to those whose 
output is close to the threshold. While most of the MS provide for a fixed discount rate (for each 
bracket where applied) expressed in EUR per hectolitres / Plato degree or EUR per hectolitres / 
ABV, three MS – Denmark, Poland, and the United Kingdom – have a slightly more complex 
system where the discount decreases proportionately as the output increases. Not all MS provide 
the maximum allowed discount – i.e. 50% of the normal rate – or they provide the full discount 
only for the smallest output bracket. Information is summarised in Figure 3 below. 

Figure 3 – MS implementation of the reduced rates for small breweries (2017) 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages", EDT. 
Legend: In blue: MS without reduced rates for small brewers; in white: MS with reduced rates for small brewers and maximum 
threshold; in grey: non-EU countries. Numbers indicate the threshold applied.   
Note: (*): degressive system. 

Analysing how MS have implemented this provision, the following considerations emerge: 

 

There  does  not  appear  to  be  an  inverse  relation  between  the  excise  rate  level  and  the 

132 

 
 
 
 
 
 
 
 
 
decision to grant reduced rates. For instance, Spain and Sweden are among the MS with a higher 
rate  on  beer,  but  they  did  not  opt  in  to  the  provision,  while  low-excise  MS  such  as  Bulgaria, 
Germany, Romania, or Latvia did opt in. 
Smaller MS tend to have lower maximum thresholds, but this is not always the case. For 
 
example,  small-to-medium  MS,  such  as  Belgium,  Denmark,  Malta,  Portugal,  or  Luxembourg, 
did adopt the 200 000 hl per year limit, while large MS such as Germany or the UK grant no 
reduction  above  40 000  and  60 000  hl  per  year,  respectively.  This  results  in  a  very  different 
market share potentially covered by a small brewery, from as low as 0.05% in Germany to as 
high as 67% in Luxembourg or 92% in Malta. 
A microbrewery producing 1 000 hl per year receives the maximum possible reduction 
 
(50%)  in  14  MS  out  of  the  23  opting  in  to  the  provision,  while  in  3  MS  it  receives  a  limited 
reduction (less than 15% of the standard rate). 
A  small  brewery  producing  10 000  hl  per  year  is  granted  the  maximum  possible 
 
reduction (50%) in 10 MS out of the 23 opting in to the provision, while in 5 MS it enjoys no or 
limited reduction (less than 15% of the standard rate). 
A  medium  brewery  producing  100 000  hl  per  year  is  granted  the  maximum  reduction 
 
(50%)  in  only  5  MS  out  of  the  23  opting  in  to  the  provision,  while  in  12  MS  it  enjoys  no  or 
limited reduction (less than 15% of the standard rate). 

Reduced rates for small distilleries have a much lower implementation rate, as only 7 MS have 
decided  to  apply  it:  Austria,  Germany,  Spain,  Croatia,  Portugal,  Romania,  and  Slovenia.  In 
Slovenia,  the  yearly  output  is  set  at  1.5  hl  of  spirits  per  year;  in  Austria,  the  yearly  output 
threshold is 4 hlpa per year, while, in the other 5 MS, the output threshold corresponds to the 
maximum  allowed  by  the  Directive  (10  hlpa).  All  MS  provide  for  the  maximum  possible 
discount  (50%),  except  for  Austria  and  Germany,  which  come  close  to  it  (46%  and  44% 
respectively),  while  in  Spain  the  discount  amounts  to  12%  of  the  standard  rate.  There  are  no 
output brackets or decreasing reductions. Details are provided in Figure 4 below.  

133 

 
 
 
 
 
Figure  4  –  MS  implementation  of  the  reduced  rates  for  small  distilleries  (2017)

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages", EDT. 
 Legend:  In  blue:  MS  without  reduced  rates  for  small  distilleries;  in  white:  MS  with  reduced  rates  for  small  distilleries  and 
maximum threshold; in grey: non-EU countries. Numbers indicate the threshold applied. 
Note: (*): threshold expressed as hl of spirits. 

NATIONAL SCHEMES FOR SMALL PRODUCERS OF ALCOHOLIC BEVERAGES 

In  the  six  MS  visited  for  this  policy  issue,  two  additional  schemes  providing  reduced  rates  or 
full  exemption  to  small  producers  have  been  identified:  the  Abfindung  for  small  distilleries  in 
Austria and the exemption for small cider makers in the UK. 

  The  Abfindung  scheme  for  small  distilleries  in  Austria.94  In  Austria,  farmers 
traditionally  distil their own fruit production, for their own consumption as well as for 
sale.  Though  its  economic  importance  in  terms  of  farmers’  income  is  considered  to  be 
marginal, distillation is regarded as part of the Austrian rural culture. Rules for farmers’ 
distilleries  have  been  in  place  for  more  than  250  years.  In  Austria,  two  kinds  of 
distilleries may be set up: 

o  Verschlussbrennerei (sealed distillery), in which the duty to pay is calculated on the 

exact amount of alcohol produced.  

o  Abfindungsbrennerei  (small-scale  flat-rate  distillery),  in  which  the  excise  duty  is 

calculated on an estimated output. 

The  Abfindung  regime  is  defined  in  Article  §55  of  the  Austrian  alcohol  tax  law95  An 

94   A similar scheme exists in Germany as well, as detailed in §114 of BrennO 1998.  
95  

‘Bundesgesetz  über  eine  Verbrauchsteuer  auf  Alkohol  und  alkoholhaltige  Waren  (Alkoholsteuergesetz)’,  consolidated 
version of 21.04.2017. 

134 

 
 
 
 
 
 
 
 
 
                                                 
Abfindungsbrennerei can produce up to 2 hlpa per year; on the first hlpa, a reduced rate 
equal to 54% of the standard rate is applied; on the second hlpa, a reduced rate equal to 
90% of the standard rate is applied (§65). Products from an Abfindungsbrennerei can be 
put up for sale under certain restrictions, but cannot be sold in other EU MS (§57). Any 
individual  can  apply  to  carry  out  distillation  activities  under  the  Abfindung  regime,  by 
registering as  a  producer and communicating  to  the customs authority his/her distilling 
equipment,  the  raw  materials  that  will  be  used,  and  the  timing  and  duration  of  the 
distillation. According to the  raw  materials  used and the duration of  the distillation, an 
output  is  estimated,  and  the  excise  duties  are  calculated.  Only  own  fruit  or  other 
agricultural products can be distilled in an Abfindungsbrennerei. 

  The  small  cider  maker  exemption  in  the  UK.  The  United  Kingdom  has  an  exemption 
from  excise  taxes  for  small  cider  makers  producing  less  than  70  hl  per  year.  The 
exemption dates back to 1976, and was contextual to the introduction of excise duties on 
cider.  The  UK  government  announced  in  July  2015  that  it  would  retain  the  exemption 
‘until and unless a replacement scheme is established’. 

To  be  eligible  for  the  exemption,  small  cider  makers  must  apply  for  an  authorisation 
from  the  customs  authority.  Once  the  authorisation  is  obtained,  small  cider  makers  are 
exempt  from  the  various  excise  obligations  (e.g.  recordkeeping,  auditing,  excise 
payments,  setting  up  of  a  tax  warehouse).  The  customs  authority  performs  occasional 
checks, and further investigates if anything appears suspicious.  

OTHER PROVISIONS FOR SMALL PRODUCERS 

Though reduced rates are not granted to small producers of wine and other fermented beverages, 
these may be granted an exemption from most of the administrative requirements provided by 
the  excise  legal  framework.  Article  40  of  the  Horizontal  Directive  provides  for  MS  the 
possibility to exempt small wine producers from the requirements on (i) production, processing 
and holding (including the setting up of a tax warehouse);96 (ii) movement of excise goods under 
suspension;97  and  (iii)  any  other  requirement  relating  to  movement  and  holding.  Small  wine 
producers are defined as those with an output of less than 1 000 hl of wine per year. Based on 
Article  15  of  Directive  92/83/EEC,  this  provision  can  also  be  applied  to  other  fermented 
beverages.98  According  to  the  fieldwork  carried  out  and  to  the  recent  evaluation  of  the 
Horizontal  Directive,  Austria99  and  Italy100  apply  the  exemption;  on  the  contrary,  France  does 
not, but it exempts small winegrowers from lodging an excise guarantee.101  

Industry analysis  

In the following sub-sections, data on the various beverage industries are presented, in order to 
estimate the number of small players and their market share. For each tax category included in 

96   Chapter III of the Horizontal Directive 
97   Chapter IV of the Horizontal Directive 
98   As done e.g. by Italy, see Article 8 of ‘Decreto 27 marzo 2001, n. 153, Regolamento recante disposizioni per il controllo 
della  fabbricazione,  trasformazione,  circolazione  e  deposito  dell'alcole  etilico  e  delle  bevande  alcoliche,  sottoposti  al 
regime delle accise, nonché' per l'effettuazione della vigilanza fiscale sugli alcoli metilico, propilico ed isopropilico e sulle 
materie prime alcoligene’, consolidated version of 4.7.2017. 
‘Schaumweinsteuergesetz 1995’, Part 3, §44 (3). 

99  
100   See Article 37.1 of ‘Decreto Legislativo 26 ottobre 1995, n. 504, Testo unico delle disposizioni legislative concernenti le 
imposte  sulla  produzione  e  sui  consumi  e  relative  sanzioni  penali  e  amministrative’,  consolidated  version  of  4.7.2017. 
Hereinafter: ‘Italian Excise Law’. 
101   Code général des impôts, art. 110-D. 

135 

 
 
 
 
 
 
 
 
                                                 
the  Directive,  the  most  representative  product  is  analysed:  beer,  still  wine,  cider  for  the  other 
fermented  beverages,  distilled  spirits  for  ethyl  alcohol,  and  fortified  wine  for  intermediate 
products.  These  industries  produce  the  most  common  products  in  their  category  in  the  six 
sample MS.102 Indeed, the supply and market share analysis presented below needs to rely on a 
relevant market, defined along geographical boundaries (i.e. for each sample MS) and product 
boundaries.  For  the  definition  of  the  policy  options  and  the  impact  analysis  (in  Section  3.3 
below), consideration will be given to the extension of reduced rates to the whole tax category. 

THE BEER INDUSTRY 

Five  of  the  six  sample  MS  apply  reduced  rates  for  small  brewers.  France,  Belgium  and  Poland 
grant them up to an output of 200 000 hl per year, while Austria and the United Kingdom limit it 
respectively to 50 000 and 60 000 hl All MS but France provide for a bracket system, the discount 
being higher for smaller entities.  A reduction up  to 50%  of the standard rate is granted only by 
France and the UK, while all other countries provide for a lower discount.103 Importantly, when 
breweries get close  to  the threshold,  the reduced  rate gets  closer to the standard one,  at 90% or 
more of the latter, hence the tax advantage becomes smaller. Full information is reported in Table 
9 below. 

Table 9 – Implementation of reduced rates for small brewers in the sample MS  
Output upper limit 
(hl) 

Standard Rate 

MS 

AT 

2.00 €/hl/° Plato 

50,000 

BE 

2.00 €/hl/° Plato 

200,000 

Brackets 
(hl) 
0-12,500 
12,500-25,000 
25,000-37,500 
37,500-50,000 
0-12,500 
12,500-25,000 
25,000-50,000 
50,000-75,000 
75,000-200,000 

Reduced rate 
(% of standard) 
60% 
70% 
80% 
90% 
87% 
90% 
93% 
96% 
99% 

FR 

7.41  
€/hl/% vol 

200,000 

No as of 2013 

50% 

PL 

1.81 €/hl/° Plato 

200,000 

UK** 

21.04  
€/hl/% vol 

60,000 

0-20,000 
20,000-70,000 
70,000-150,000 
150,000-200,000 
0-5,000 
5,000-30,000 
30,000-60,000 

68%* 
84%* 
87%* 
90%* 
50% 
86%*** 
97%*** 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages, EDT. 
Notes: * calculated on 12° Plato beer; ** with reference to beer with 2.8-7.5% vol; *** calculated on the mid-point of 
the bracket. 

Table 10 below provides a summary of the information retrieved on the production structure of the 
beer  industry  in  the  six  MS.  These  best  estimates  result  from  the  consolidation  of  public  data 

102   Based on ISWR sales data for 2016 and total excise revenues per fiscal category from EDT. 
103  

In Poland, the reduced rate is granted per hl of production, while the excise is calculated per hl/° Plato. Hence, the ratio of 
the reduced rate over the standard one is not fixed. 

136 

 
 
 
 
 
 
                                                 
provided  by  tax  authorities  and  trade  associations,  as  well  as  from  quantitative  and  qualitative 
information collected during the fieldwork and used to complement missing data. The definition 
of  the  various  size  classes  varies  from  country  to  country,  as  there  is  neither  a  shared  industry 
consensus, nor a standard data collection format. In most countries, the definition of what a micro 
or small brewer is depends on the national brackets used to administer the reduced rate scheme. 
The definition of a medium brewer is largely influenced by the country market structure. 

Table 10 – Number of small brewers and supply structure 
IT 
AT 
0% 
(98% below 
1000 hl) 

%  of  brewers  covered  by 
the reduced rate 

BE 

FR 

97% 

99% 

90% 

PL 

87% 

UK 

99% 

EU* 

97% 

% of output covered by 
reduced rate 

6% 

10% 

4%. 

0% 

3% 

5% 

5% 

Market Share 

3% 

2.5% 

1.5% 

1.5% 

8.5% 

Micro Brewers 
(up to 1,000/5,000 hl) 
Small Brewers 
(up to 10,000/20,000 hl) 
Medium Brewers 
(up to 100,000/200,000 hl) 
Large Brewers 
(over 200,000 hl) 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages, Brewers of Europe: interviews with national trade federations, tax and customs authorities. 
Note: market segment covered by the reduced rates; market segment partly covered by the reduced rates. 
(*): data refer only to MS implementing the reduced rates; based on values from sample MS (AT, BE, FR, PL, and UK). Size classes 
are only indicative and vary across the sample MS, depending on the thresholds adopted for reduced rates and industry practice.  

6.5% 

2.5% 

90% 

90% 

96% 

92% 

75% 

15% 

75% 

20% 

8% 

2% 

7% 

5% 

n/a 

Findings show that the vast majority of active brewers, 97% in the overall sample, and about or 
more  than  90%  in  each  country,  is  covered  by  the  reduced  rates.  However,  their  production 
represents a small share of output, 5% in the overall sample, and not higher than 10% in any MS. 
In  the  UK  and  Austria,  where  the  output  threshold  is  lower  than  the  maximum  allowance  and 
where the market features a significant group of so-called regional brewers in the area of 100 000 
to 500 000 hl, reduced rates cover 5-6% of the market. In Belgium, a country with a longstanding 
tradition  of  local  and  small  brewing  and  where  the  maximum  threshold  is  set  at  200 000  hl, 
reduced rates cover 10% of the market, the highest share among the MS analysed. In Poland, there 
is  a  significant  presence  of  mid-size  breweries,  with  an  output  of  about  100 000-500 000  hl  per 
year;  however,  since  only  a  part  of  these  regional  players  falls  below  the  threshold,  the  market 
share covered by reduced rates is about 3%. In France, the importance of small players is limited: 
even though the number of small brewers increased four-fold over the last decade, their population 
has grown from a very small base;104 as a consequence, small brewers represent only about 4% of 
the market. Finally, in Italy, where reduced rates do not exist, microbreweries up to 1 000/1 500 hl 
represent 98% of the active players and about 2.5% of the market.105  

THE DISTILLED SPIRIT INDUSTRY 

The  quality  of  the  information  on  the  number,  size,  and  market  share  of  players  active  in  the 

104  

In France, the brewing tradition almost disappeared in the 1980’s, when only 30 brewers were active; this was due to changes 
in consumer taste and the industry consolidation process. This trend has reversed and, nowadays about 1,000 active operators 
exist. E. Gillard, ‘Bières et brasseries françaises du 21ème siècle’, Projet Amertume, 2016. 

105   These  findings  are  in  line  with  those  described  in  the  Ramboll  Evaluation,  where  the  share  of  production  covered  by 
reduced rates in the three countries for which data are estimated is around or above 90%, and where the 5 big producers 
control 50% to 70% of the market. MS covered: DE, FR, IT, and UK. 

137 

 
 
 
 
 
 
 
 
                                                 
supply of distilled spirits is much poorer compared to what is available for beer and wine.106 This 
is also due to the fact that only 7 MS opted in for the reduced rates for small distilleries – while 23 
opted in for beer – and to the fact that there is no definition of ‘small spirit producer’ in other parts 
of  the  EU  legislative  framework,  either  for  tax  or  agricultural  policies.  However,  several  trends 
emerged from the fieldwork, which can be summarised as follows: 

The number of active distilleries is in the order of magnitude of 100 units in four out of the 
1. 
six MS visited: in particular, 120 distillers are licensed in Poland, between 75 and 90 of which are 
considered active; about 150 are active in Italy, and 230 in the UK. In Belgium, it is estimated that 
about  40-45  active  distilleries  are  present  in  the  market.  In  France,  the  number  of  operators  is 
estimated at about 5 000-10 000. Austria is an exception: therein, it is estimated that about 30 000-
40 000  companies  or  individuals,  mostly  farmers,  distil  spirits  –  the  vast  majority  under  and 
because of the simplified flat-rate Abfindung regime. 

Data on the size of distilleries are scant. In Poland about 45 distilleries produce less than 
2. 
100  hlpa  per  year  and  their  market  share  is  estimated  to  fall  below  0.4%.  In  France,  50  to  60 
distilleries are estimated to fall below 10 hlpa, and they would represent, at maximum, 0.04% of 
the spirit market. To the contrary, estimates show that about 2 000 French distillers produce less 
than  10 000  hl  of  spirits  per  year  (equivalent  to  4 000  hlpa  at  40%  vol).  In  the  UK  and  Italy, 
stakeholders and the authorities estimated that the presence of small distilleries with a scale of 10 
hlpa  is  nihil  or  negligible,  and  that  they  could  be  active  only  in  very  premium  segments,  or  as 
ancillary activities to  farming,  with a strict local dimension. In Austria on the contrary, most of 
active distillers fall within the Abfindung, and hence produce only up to 1 or 2 hlpa per year. 

There are growth trends in the small distillery segment, but they are not widespread across 
3. 
the MS. Growth was reported both in the UK, also thanks to a spur of small gin distilleries, and in 
Belgium, based on data on the applications for a tax warehouse. Growth of small distillation is not 
driven by fiscal incentives, but rather by consumers’ demand. However, in other countries such as 
Poland,  the  number  of  distillers,  and  especially  of  small  agricultural  distilleries,  is  rapidly 
shrinking; in Italy, there is no indication of a growth of small-scale distillation.  

THE CIDER INDUSTRY 

The  consumption  of  cider  is  largely  concentrated  in  a  handful  of  MS.  The  UK  has,  by  far,  the 
largest  market,  representing  about  50-55%  of  the  EU  market,  followed  by  Spain,  France, 
Germany,  and  Ireland.107  Cider  markets  are  larger  in  countries  where  there  is  a  traditional 
production. The most important cider-producing countries or regions are indeed the British Islands 
–  both  Ireland  and  the  UK  –  France,  especially  Normandy  and  Brittany,  Spain,  especially  the 
Asturias,  and  Germany.  To  better  collect  information  on  cider,  the  sample  of  MS  thus  includes 
Ireland, while Austria and Belgium have been dropped. In this way, the sample consists of three of 
the  largest  cider  markets  (France,  Ireland,  and  the  UK)  and  two  marginal  producers  (Italy  and 
Poland). 

Table 11 below provides a summary of the information retrieved on the production structure of the 
cider industry in these five MS. The estimates below are based on data provided by customs, tax, 
and  agricultural  authorities  and  trade  associations.  Additional  quantitative  and  qualitative 

106   As also acknowledged by trade associations. See Vinum & Spiritus Association Belgium, ‘La réalité économique derrière 
notre  secteur’,  Available  at:  http://fr.vinumetspiritus.be/sector/economics/de-economische-realiteit-achter-onze-sector/, 
last accessed on July 2017.   

107   AICV, ‘European Cider Trends’, 2016 Update. 

138 

 
 
 
 
 
 
 
 
                                                 
information collected during the fieldwork was used to complement missing data. The definition 
of  the  various  size  classes  varies  from  country  to  country,  as  there  is  neither  a  shared  industry 
consensus, nor a standard data collection format. In general, micro-cider makers are considered to 
be those whose yearly production is below 100 hl (e.g. 70 hl in the UK). For these players, cider 
production remains an ancillary activity, e.g. for farmers or farmhouses. The definition of small 
cider makers usually encompasses those whose production is below 10 000/15 000 hl. 

Table 11 – Estimated market share of small and micro cider makers and their output 

FR 

IE 

IT 

% of small cider makers  

10% 

20% 

PL 

n/a 

UK 

EU 

32% 

of  micro-cider 

% 
makers 

Production 
small cider makers 

share  of 

100% 

89% 

73% 

11% 

64% 

17.5% 

3% 

n/a 

3% 

100% 

2.5% 

share  of 

Production 
micro-cider makers 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and  alcoholic  beverages,  interviews  with  national  trade  federations,  tax  and  customs  authorities,  ministries  of 
agriculture. 
Note: EU estimates based on the five sample MS. 

0.1% 

0.1% 

2% 

15% 

82% 

4.6% 

The  distribution  of  the  firm  population  and  production  of  cider  is  similar  to  that  of  the  beer 
industry. Micro- and small cider makers represent about 97% of the number of active companies, 
and between 93% and 99% in the MS considered. Their production share is estimated at 4.6% in 
the MS considered, and is below 5% in all countries except for France, where small independent 
companies are estimated to represent between 15% and 20% of the production. The production of 
micro-cider makers is negligible in the UK and Ireland, where the market is dominated by very 
large  companies,  and  does  not  reach  more  than  3%  in  Poland  and  France,  confirming  the 
‘ancillary’ nature of this market segment. 

THE STILL WINE INDUSTRY 

The still wine value chain features different actors that play different roles in terms of scope of the 
activity. There are at least four kinds of wine producers: 

‘Classical’  wine  makers:  companies  that  are  both  wine  growers  and  wine  makers;  they 
1. 
produce and bottle their own wines. A wine maker may also buy grape, juice or bulk wine from 
other producers, in a variable percentage.  
Independent  wine  makers:  as  the  classical  wine  maker,  they  are  both  wine  growers  and 
2. 
wine  makers.  However,  independent  wine  makers  process  only  their  own  grape.  They  usually 
have a smaller scale than classical wine makers. 
Cooperatives  of  wine  growers:  a  cooperative  collects  grape,  juice  or  bulk  wine  from  its 
3. 
members,  which  in  turn  usually  are  co-owners,  who  then  receive  monetary  or  in-kind 
compensation as a share of profits or finished production. Cooperatives are thus wine makers, but 
not  necessarily  wine  growers.  Very  small  wine  growers,  who  have  no  interest  or  no  means  to 
produce, bottle, and trade wine, usually confer their production to cooperatives. 
Negociants en vin, or wine shippers: a wine shipper buys grape, juice, or bulk wine from 
4. 
wine growers, and then produces, bottles and sells wine under its own name. Hybrid companies 

139 

 
 
 
 
 
 
 
 
exist, which are wine makers and also produce wine as shippers. 

As a consequence, there could be at least two kinds of small players in the still wine value chain: 
the small wine grower – regardless of whether it confers his/her production to a large player or not 
–  and  the  small  wine  producer.  As  the  focus  of  the  reduced  rate  provisions  is  on  operators 
producing alcoholic beverages (i.e. breweries and distilleries), rather than on other operators along 
the  value  chain,  the  analysis  below  focuses  on  small  wine  producers.  However,  it  should  be 
remembered  that  large  wine  makers  often  work  in  cooperation  with  a  constellation  of  small 
players. 

Table 12 below provides information on the share of players below 1 000 hl in the six sample MS, 
and  on  their  share  of  national  production.  Data  on  firm  distribution  have  been  collected  from 
public authorities, trade associations, and sectoral literature.108 In countries where the production 
of wine is marginal (Belgium, Poland, and the UK), all producers are considered to fall below this 
threshold. In Austria and Italy, the vast majority of producers has an output lower than 1 000 hl; 
however,  in  Austria,  where  production  is  very  much  atomised  and  there  are  very  few  large 
winemakers, small producers represent about 57% of the national production; in Italy, where large 
producers  do  exist,  small  producers  only  represent  about  15%  of  national  production.  The  only 
country  where  the  number  of  small  producers  is  lower  than  90%  is  France,  with  69%  of  wine 
producers  estimated  to  be  small;  in  terms  of  production,  their  share  is  in  line  with  that  of  Italy 
(17%). 

Table 12 – Estimated market share of small still wine producers and their output 

AT 

BE 

FR 

IT 

PL 

UK 

EU 

%  of  wine  producers 
below 1,000 hl 

97% 

100% 

69% 

92% 

100% 

100% 

85% 

% of production 

57% 

100% 

17% 

15% 

100% 

100% 

17% 

2,300 

Total wine production 
2015-16 (‘000 hl) 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages, from DG AGRI, AGRIMER; interviews with national trade associations, CEVI, ministries of 
agriculture, tax and customs authorities. 
Note: EU estimates based on the six sample MS. 

165,600 

47,900 

51,500 

4.5 

10 

40 

THE FORTIFIED WINE INDUSTRY 

Intermediate  products  are  a  residual  category  –  hence,  ‘intermediate’  between  fermented 
beverages  and  ethyl  alcohol,  which  includes  products  ‘typically  based  on  a  naturally  fermented 
beverage to which alcohol and, in some cases, other ingredients have been added’.109 Its residual 
character is confirmed by the fact that it represents the least significant category in terms of tax 

108   For France, data refer to wine producers below EUR 10 mn of annual revenues. A company of this size would produce 
less than 1,000 hl, with the exception of players producing the cheapest category of  wine, i.e. without any geographical 
indication.  Even  in  this  case,  considering  2015  prices,  a  company  would  produce  about  1,250  hl.  Hence,  this  revenue 
threshold is considered a good approximation of the 1,000 hl output threshold. For the UK, the share of producers below 
1,000 hl is estimated based on qualitative information. 

109   Commission of the European Communities, Proposal on the harmonisation of the structures of excise duties on alcoholic 

beverages and on the alcohol contained in other products, COM(90)432, 7.11.1990, at p.8. 

140 

 
 
 
 
 
 
 
 
                                                 
revenues:  at  EU  level,110  revenues  from  intermediate  products  amount  to  2.3%  of  total  excise 
revenues, with the maximum share in Portugal – home of Port wines – where it reaches 6.3%.  

This  category  includes  several  products,  such  as  fortified  wines,  vin  doux  naturel,  vermouth, 
aromatised  wine  aperitifs,  as  well  as  certain  mixed  drinks  with  a  fermented  base.  As  a 
homogeneous analysis of such a diversified range of products is not possible, the focus will be on 
fortified wines, the most representative product in this category.111 

Fortified  wines  are  produced  by  adding  alcohol  –  usually  by  means  of  a  neutral  strong  spirit  – 
during fermentation to increase the alcoholic strength of the product. As a result, fermentation is 
stopped,  so  that  a  part  of  the  sugar  content  of  the  must  is  not  converted  into  alcohol,  and  the 
resulting  product  has  a  sweeter  taste.112  Port,  Sherry,  Madeira,  Marsala,  Samos  and  Pineau  des 
Charentes  are  among  the  most  common  types  of  fortified  wines.  All  these  products  have 
geographically protected indications. The quantity of fortified wines is limited when confronted to 
wine. As an example, the production of Port amounts to about 650 000 hl,113 the volume of Sherry 
is about 900 000 hl,114 in Italy about 25 000 hl of Marsala and 30 000 hl of other fortified wines 
are produced,115 and finally about 33 000 hl of Madeira are produced each year.116 

The value chain for fortified wines include growers, producers of the base wine, and ‘fortifiers’. 
Grapes and base wine can be produced by a large number of wine growers: for example, 30,000 
for Port,117 and 1 050 for Madeira. However, the vast majority of them does not produce the end 
product:  fortification  and  ageing  (where  necessary)  are  done  by  shippers  (also  Bodegas  for 
Sherry). For instance, 90% of the Port trade is concentrated on 15 shipping houses,118 while there 
are  7  producers  of  Madeira,119  and  about  60  shippers  /  stockists  /  Bodegas  for  Sherry.120  The 
estimated average production for these producers is 39 000 hl for Port, 47 000 hl for Madeira, and 
15 000  hl  for  Sherry.  For  this  reason,  although  many  small  wine  growers  or  wine  makers  work 
within the value chain, the number of small producers and their market share is residual. 

110   Excluding 5 MS for which disaggregated revenues from intermediate products are not available: EL, HR, IT, MT, and PL. 
111   The share of revenues from fortified wines over the total revenues from intermediate products at EU level is of 61% (sales 
data retrieved from IWSR, excise duty rates and revenues from EDT). The analysis excludes MT, EL, IT, PL, HR, IE and 
UK,  because  revenue  data  on  intermediate  products  are  not  homogeneous.  Outliers  (NL,  ES)  adjusted  based  on  EU 
average. 

112   Court 

of 

Master 

Sommeliers, 

‘Port 

– 

Port 

Trade’, 

Available 

at: 

www.courtofmastersommeliers.org/pdfresources/portnotes.pdf, last accessed on July 2017.  

113   Correia L., Rebelo  J., Caldas J., ‘Production and Trade of Port Wine: Temporal Dynamics and Pricing’, Page 16 (2012 

data), 2015. 

114   Great Wines from Spain, ‘The Wines – Sherry’, Available at: 

http://www.greatwinesfromspain.com/the-wines/sherry, 2014 Data, last accessed on July 2017. 

115   Corriere Vinicolo, 2016 data. 
116   Wijnstudio, ‘Madeira Wine’, Available at: http://www.madeirawine.nl/madeira-wine/, last accessed on July 2017.  
117   Brito C, ‘A network perspective of the port wine sector’, International Journal of Wine, Vol. 18 No. 2, 2006.  
118   The 15 members (shippers) of AEVP represent 90% of the total Port trade, Available at: http://www.aevp.pt/Members, last 

accessed on July 2017. 

119   Discovering  Madeira,  ‘Who  produces  Madeira  Wine’,  Available  at:  http://www.discoveringmadeira.com/who-produces-

madeira-wine, last accessed on July 2017.  

120   Consejo  Regulador 

de 

los  Vinos 

de 

Jerez 

y  Manzanilla, 

‘Bodega 

Types’,  Available 

at:  

http://www.sherry.wine/wines/bodegas, last accessed on July 2017.  

141 

 
 
 
 
 
 
 
                                                 
  
ANNEX 11.  DRIVER OF THE DYSFUNCTIONAL APPLICATION OF REDUCED RATES 

Driver: Obsolete and unclear legislation  

All  problems  relating  to  the  application  of  reduced  rates  have  their  source  in  imprecise  and 
obsolete  provisions.  The  Directive  was  adopted  25  years  ago.  While  the  Directive  works  well 
for the main categories of alcoholic beverages, it cannot and does not cover developments which 
were not envisaged in 1992. These developments include: 

Increase in the number of small brewers and cross-border trade 
Increase in complex business structures such as cooperative agreements 

 
 
  Expansion of niche products to mainstream markets (such as cider) 
 

Increase in interest for low strength alcohol 

In  terms  of  competitive  disadvantage  for  certain  product  categories,  the  provision  of  the 
Directive  regulating  which  products  and  product  categories  could  be  subject  to  reduced  rates, 
has  become  obsolete with  time. This  is due to  the  adoption of other EU legislation (described 
above), which sets the alcohol content above thresholds for certain products. 

In terms of the legal uncertainty, as described under the problem definition, the Directive does 
not  clarify  what  a  'legally  and  economically  independent'  brewer  or  distillery  is.  A  small 
producer  is  in  principle  allowed  to  outsource,  possibly  under  license,  the  production  of  beer  to 
another  brewer  ('contract  brewing').  This  business  relation  is  less  common  than  that  of  a  small 
producer  brewing  under  license,  but  it  may  arise,  e.g.  when  the  small  brewer  has  exhausted  its 
production  capacity.  For  the  purpose  of  excise  duties  and  rate  reduction,  that  situation  poses  a 
number  of  issues.  Firstly,  contract  brewing  could  be  used  to  circumvent  the  output  threshold 
(either  because  of  the  associated  legal  uncertainty  or  the  lack  of  appropriate  verification  by 
customs authorities). Secondly, it is unclear whether contracted beer can be taxed at a reduced rate 
or  should  be  treated  like  beer  brewed  under  license  (and  thus  excluded  from  the  reduced  rate). 
Thirdly, this contract could be seen as breaching the independence of each counterpart. If that is 
not the case, uncertainty remains whether each of the two economic operators individually or the 
jointly  should  remain  below  the  output  threshold  in  order  to  continue  benefiting  from  reduced 
rates.121  

121   A legal case is undergoing before a French court (interviews with economic operators). 

142 

 
 
 
 
 
 
 
                                                 
ANNEX 12.  DRIVER OF THE UNCLEAR PROVISIONS TO MEASURE THE PLATO DEGREE OF 
SWEETENED / FLAVOURED BEER 

Driver: divergent interpretations of the term 'finished product' 

The  Directive  does  neither  clarify  what  is  a  ‘finished  product’ 
in  the  case  of  a 
sweetened/flavoured  beer  nor  provide  guidance  on  the  correct  method  to  measure  its  Plato 
degree.  As  a  consequence,  three  different  interpretations  and  measurement  methods  exist  to 
determine the Plato degree of sweetened/flavoured beer (for detailed methodology see Annex 13 
below).  The  first takes  into  account  only  the  ingredients  of  the  base  beer,  whereas  the  second 
and third approaches consider also the ingredients added later in the process. MS may use any of 
the three approaches to measure the Plato degree.  

  Approach  A:  measures  the  Plato  degree  of  the  base  beer,  prior  to  the  addition  of 

sugar/flavours;  

  Approach  B1:  measures  the  Plato  degree  of  the  finished  product  after  the  addition  of 
sugar/flavours taking into account only the ‘non-fermented (real) extract’, i.e. the extract 
of  the  base  beer  without  considering  sugar/flavours  added  to  the  sweetened/flavoured 
beer after fermentation;  

  Approach  B2:  measures  the  Plato  degree  of  the  finished  product  after  the  addition  of 
sugar/flavours  taking  into  account  the  ‘present  extract’,  i.e.  the  extract  of  the 
sweetened/flavoured beer including also the sugar/flavours added. 

Plato  is  a  method  traditionally  applied  in  central  Europe  and  14  MS  calculate  the  excise  duty 
using Plato degree per hectolitre of the finished product. While no complete dataset is available 
for  the  entire  EU,  only  the  sample  of  the  MS  studied  in  the  context  of  the  revision  of  the 
Directive  show  that  indeed  the  notion  of  a  'finished  product',  and  therefore  the  choice  of  the 
measurement method vary. Of the 50 responses to the OPC, 36 respondents interpret the term 
'finished products' with reference to the 'present extract' (approach B2), which the remaining 14 
interpret  the  term  with  reference  to  the  'real  extract'  (i.e.  the  base  beer  before  the  addition  of 
sugars/flavours,  approach  A  or  B1).  Within  the  beer  industry,  69%  of  respondents  agree  with 
approach B2 and 31% interpret the term in line with approach A or B1. 

143 

 
 
 
 
 
 
 
ANNEX 13.  METHODOLOGY FOR MEASURING THE PLATO DEGREE 

To  understand  the  options  of  measuring  the  Plato  degree  of  sweetened/flavoured  beer,  it  is 
useful to consider the production process, which consists of three main steps: 

(1) First, the wort is created from the blending of crushed malted barley and hot water. For 
instance,  as  shown  in  Figure  5,  100kg  of  unfermented  wort  contain  88kg  of  water, 
8.85kg of ‘fermentable extract’, and 3.15kg of ‘non-fermentable (or real) extract’; 

(2) Second,  fermentation  converts  part  of  the  ‘fermentable  extract’  into  alcohol.  The  wort 
turns  into  the  ‘base  beer’.  However,  not  all  ‘fermentable  extract’  is  transformed  into 
alcohol. In 1843, the Bohemian scientist Karl Balling found that 2.066g of ‘fermentable 
extract’  created  1.000g  of  alcohol  and  1.066g  of  by-products  (e.g.  brewers’  yeast  and 
CO2). This ratio is fixed and is hence used to calculate the Plato degree of beer. The by-
product  is  usually  removed  from  the  base  beer,  which  in  the  example  below  after 
fermentation only weighs 95.44kg.  

(3) Finally,  to  obtain  sweetened/flavoured  beer,  additional  unfermented  sugar/flavour  is 
added  to  the  ‘base  beer’  (e.g.  3kg  in  the  example  below,  which  reflects  the  brewing 
process 
the 
sweetened/flavoured  beer  is  heavier  than  the  base  beer  (98.44kg  in  Figure  5).  ‘Present 
extract’ is calculated as the sum of the ‘real extract’ and the added sugar/flavour in the 
sweetened/flavoured beer (6.15kg in the example). 

for  sweetened/flavoured  beer  other 

radler).  Consequently, 

than 

Figure  5:  The  production  process  for  sweetened/flavoured  beer  and  determination  of 
extract 

Source: Brewers of Europe.122 
Note: This example describes the production process of  sweetened/flavoured beer other to which sugar/flavour is added after 
fermentation. Flavoured beers with additives included in the wort usually do not undergo the subsequent sweetening process. 
Additives  included  in  the  wort  are  either  transformed  into  alcohol  or  part  of  non-fermented  (real)  extract.  Also,  the  example 

122   Brewers of Europe (18 May 2016), ‘European approach to calculation of Plato’, presentation 

144 

 
 
 
 
 
  
  
 
                                                 
corresponds to the production of sweetened/flavoured beer other than radler as a relatively small amount of sugar/flavour is 
added. For a typical radler, the base beer is mixed with a larger quantity of lemonade (typically in proportions of 50:50), so 
both water and sugar are added to prepare the final product. 

1.  Approaches to measuring the Plato degree of sweetened/flavoured beer  

Article 3(1) of the Directive requires MS to calculate the Plato degree of ‘finished products’, yet 
the  case  of  a 
the  Directive  does  neither  clarify  what 
sweetened/flavoured  beer  nor  provide  guidance  on  the  correct  method  to  measure  its  Plato 
degree. So, three different interpretations and measurement methods exist to determine the Plato 
degree of sweetened/flavoured beer. The first takes into account only the ingredients of the base 
beer,  whereas  the  second  and  third  approach  considers  also  the  ingredients  added  later  in  the 
process.  

is  a  ‘finished  product’ 

in 

1.1. Approach A: measuring the Plato degree before adding sugar/flavours 

This  approach  aims  to  calculate  the  Plato  degree  of  the  base  beer,  prior  to  the  addition  of 
sugar/flavours. This is similar to calculating the Plato degree of non-sweetened or non-flavoured 
beer.  In  this  case,  one  calculates the  Plato  degree  based  on  the  Balling  formula  using  the  real 
extract  and  mass  of  the  base  beer.  The  alcohol  strength  of  the  base  beer  in  Plato  degree  is 
measured as follows: 

𝑃𝑙𝑎𝑡𝑜 𝑑𝑒𝑔𝑟𝑒𝑒 =

(2.066𝑥𝐴𝑙𝑐𝑜ℎ𝑜𝑙) + 𝑹𝒆𝒂𝒍 𝒆𝒙𝒕𝒓𝒂𝒄𝒕
𝑀𝑎𝑠𝑠 𝑜𝑓 𝑏𝑒𝑒𝑟 + (1.066𝑥𝐴𝑙𝑐𝑜ℎ𝑜𝑙)

∗ 100 

Therefore, following the example provided in Figure 5, the base beer is brewed at 12° Plato: 

(2.066 ∗ 4.29𝑘𝑔) + 3.15𝑘𝑔
95.44𝑘𝑔 + (1.066 ∗ 4.29𝑘𝑔)

∗ 100 = 𝟏𝟐 ° 𝑷𝒍𝒂𝒕𝒐 

This  approach,  which  is  reportedly  applied  by  Romanian  authorities,  focuses  entirely  on  the 
features  of  the  base  beer.  In  fact,  the  quantity  of  water/sugar  added  to  obtain  the 
sweetened/flavoured beer has no impact on the Plato degree of the base beer. For tax purposes, 
approach A requires to apply the excise duty only to the quantity of base beer contained in the 
sweetened/flavoured beer. For instance, a consumer of radler including 50% of beer at 12° Plato 
and  50%  of  lemonade,  would  pay  excise  duty  only  on  50%  of  the  content  of  the  purchased 
bottle/can. 

There  is  no  difference  between  approach  A  and  the  two  other  approaches  (B1,  B2)  described 
below  with  regard  to  sweetened/flavoured  beer  to  which  additives  are  included  already  in  the 
wort;  in  such  a  case,  the  base  beer  corresponds  to  the  bottled  product  and  the  real  extract 
corresponds to the present extract. 

1.2. Approach  B1:  measuring  the  Plato  degree  after  adding  sugar/flavours,  on  the  real 

extract 

This  approach  aims  to  calculate  the  Plato  degree  of  the  sweetened/flavoured  product  after  the 
addition  of  sugar/flavours,  by  taking  into  account  the  ‘non-fermented  (real)  extract’,  i.e.  the 
extract  of  the  base  beer  without  considering  sugar/flavours  added  to  the  sweetened/flavoured 
beer after fermentation, and the total mass of the sweetened/flavoured beer. The approach best 
reflects the actual alcohol content of the product, and is calculated as follows: 

145 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
𝑃𝑙𝑎𝑡𝑜 𝑑𝑒𝑔𝑟𝑒𝑒 =

(2.066𝑥𝐴𝑙𝑐𝑜ℎ𝑜𝑙) + 𝑹𝒆𝒂𝒍 𝒆𝒙𝒕𝒓𝒂𝒄𝒕
𝑀𝑎𝑠𝑠 𝑜𝑓 𝑏𝑒𝑒𝑟 + (1.066𝑥𝐴𝑙𝑐𝑜ℎ𝑜𝑙)

∗ 100 

In  the  above  example,  this  approach  yields  11.7°  Plato  for  the  sweetened/flavoured  beer. 

(2.066 ∗ 4.29𝑘𝑔) + 3.15𝑘𝑔
98.44𝑘𝑔 + (1.066 ∗ 4.29𝑘𝑔)

∗ 100 = 𝟏𝟏. 𝟕° 𝑷𝒍𝒂𝒕𝒐 

1.3. Approach  B2:  measuring  the  Plato  degree  after  adding  sugar/flavours,  on  the 

present extract 

This  approach  aims  to  calculate  the  Plato  degree  of  the  sweetened/flavoured  product  after  the 
addition  of  sugar/flavours,  by  taking  into  account  the  ‘present  extract’,  i.e.  the  extract  of  the 
sweetened/flavoured 
the 
sweetened/flavoured product, and the total mass of the sweetened/flavoured beer. It is calculated 
by applying this formula: 

sugar/flavours 

considering 

included 

beer 

also 

the 

in 

(2.066xAlcohol) + 𝐏𝐫𝐞𝐬𝐞𝐧𝐭 𝐞𝐱𝐭𝐫𝐚𝐜𝐭
Mass of beer + (1.066xAlcohol)

∗ 100 = 𝑃𝑙𝑎𝑡𝑜 

In the above example, this approach leads to 14.57° Plato: 

(2.066x4.29kg) + 6.15kg
98.44kg + (1.066x4.29kg)

∗ 100 = 𝟏𝟒. 𝟓𝟕 𝒅𝒆𝒈𝒓𝒆𝒆𝒔 𝑷𝒍𝒂𝒕𝒐 

that 

Reportedly, this is the most used approach by tax authorities in Plato countries. Nonetheless, it 
is  acknowledged 
the 
sweetened/flavoured  beer;  for  this  reason,  the  beer  industry  claims  this  method  is  technically 
incorrect. Reportedly, there is virtually no difference between method B1 and method B2 in case 
of artificial sweeteners (e.g. aspartame), as such sweeteners can be identified by customs lab and 
excluded from the calculation of the present extract123. 

this  approach  may  overestimate 

the  Plato  degree  of 

123   Tax authorities interviewed for the Study argued that few brewers actually use sweeteners instead of sugar, which shows 
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. 

146 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
ANNEX 14.  COUNTRY-SPECIFIC ANALYSIS OF IMPACTS OF POLICY OPTIONS FOR MEASURING 

PLATO DEGREE IN SWEETENED/FLAVOURED BEER 

AUSTRIA 

In the case of Austria the price of sweetened/flavoured beer would decrease by about 6% and 
consumption (volume) would increase by about 3% when switching from approach B2 (baseline 
and  no  change  scenario)  to  approach  A  or  B1.  Tax  revenues  (excise  duty  and  VAT  on  excise 
duty) generated  by sweetened/flavoured beer  would decrease  considerably  by about  43%.  The 
changes  are  significant,  as  the  Austrian  sweetened/flavoured  beer  market  consists  entirely  of 
radler. Nonetheless, when compared with total beer consumption and total tax revenue (excise 
duty and VAT on excise duty) on beer, the magnitude of changes becomes minor: consumption 
of beer would increase by only 0.2%, tax revenues would decrease by about 2%, i.e. less than 
EUR 5 million out of more than EUR 226 million. 

Table  13:  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Austria  

1.B.2  /  2.B.2  (no 
change) 
B2 (Baseline) 

Option 

 1.A / 2.A 

 1.B.1 / 2.B.1 

A 

B1 

 183  

 172  

 172  

3.2% 

-5.8% 

-5.9% 

radler 

 491,826  

 476,952  

 492,260  

no change 

consumption 

Approach 
Average  price  of 
(EUR/hl)*  
 % Change in price  
Overall 
of 
sweetened/flavoured beer (hl) 
over 
Change 
 % 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)**   
 %  Change  over  revenues  from 
sweetened/flavoured beer 
 %  Change  over  revenues  from 
total beer 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages, Author’s elaboration of IWSR and EDT series. 
Note: Baseline year: 2015; *Based on IWSR the Austrian sweetened/flavoured beer market consists entirely of radler; ** Excise 
duty and VAT on excise duty. 

 11,451,017  

from 
beer 

 6,475,019  

 6,620,677  

no change 

no change 

no change 

no change 

revenues 

-43.5% 

-42.2% 

-2.2% 

-2.1% 

0.2% 

0.2% 

3.1% 

BELGIUM 

In Belgium, the changes are weaker, given that the market is dominated by sweetened/flavoured 
beer  other  than  radler.  Still,  tax  revenues  (including  VAT  on  excise  duty)  fall  by  roughly  22-
23% when changing from approach B2 (baseline and no change scenario) to approach A or B1. 
Price would only decrease by about 4% for radler and 1.5% for other sweetened/flavoured beer; 
overall  consumption  of  sweetened/flavoured  beer  would  increase  by  some  1%.  Again,  such 
impacts  appear  to  be  marginal  when  compared  to  the  overall  beer  consumption  (+0.1%)  and 
total tax revenues (including VAT on excise duty) on beer (-1.5%, i.e. EUR 3.5 million out of 
EUR 235 million). 

147 

 
 
 
 
 
 
 
 
Table  14  –  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Belgium  

2.B.2  

/ 

1.B.2 
(no change) 
B2 (Baseline) 

Option 

1.A / 2.A 

1.B.1 / 2.B.1 

A 

B1 

 257  

 266  

 411  

 405  

 256  

 406  

-1.6% 

-3.7% 

-3.8% 

-1.4% 

radler 

 530,552  

no change 

other 
beer 

consumption 

Approach 
Average  price  of 
(EUR/hl)  
 % Change in price  
Average  price 
of 
sweetened/flavoured 
(EUR/hl)  
 % Change in price  
Overall 
of 
sweetened/flavoured beer (hl) 
over 
Change 
 % 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)* 
 % Change over revenues from 
sweetened/flavoured beer 
 % Change over revenues from 
total beer 
Source:Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s elaboration of IWSR and EDT series. 
Note: Baseline year: 2015; * Excise duty and VAT on excise duty. 

 12,341,679  

 12.075,829  

 15,795,902  

from 
beer 

no change 

no change 

no change 

no change 

no change 

revenues 

 530,885  

 524,948  

-21.9% 

-23.6% 

-1.5% 

-1.6% 

0.1% 

1.1% 

1.1% 

0.1% 

GERMANY 

Germany has a low excise duty rate on beer (EUR 0.79/hl/° Plato in 2017). The price changes 
from  approach  B2  (baseline  and  no  change  scenario)  to  A/B1  are  thus  rather  low  (-2.2%  for 
radler  and  about  -1%  for  other  sweetened/flavoured  beer),  and  so  are  the  resulting  changes  in 
overall  consumption  volume  of  sweetened/flavoured  beer.  Tax  revenues  (including  VAT  on 
excise  duty)  generated  by  sweetened/flavoured  beer  would  change  by  roughly  one  third 
compared to the baseline approach. Still, the loss in tax revenue (about EUR 7 million) does not 
even amount to 1% of the total tax revenue from consumption of beer in Germany (more than 
EUR 805 million). 

Table  15  –  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Germany  

Option 

 1.A / 2.A 

 1.B.1 / 2.B.1 

Approach 
Average  price  of 
(EUR/hl)  
 % Change in price  
Average  price 
sweetened/flavoured 
(EUR/hl)  
 % Change in price  

of 

radler 

other 
beer 

A 

 184  

-2.2% 

 229  

-1.0% 

B1 

 184  

-2.2% 

 229  

-1.2% 

148 

1.B.2  /  2.B.2  (no 
change) 
B2 (Baseline) 

 189  

no change 

 231  

no change 

 
 
 
 
 
1.0% 

1.0% 

0.0% 

revenues 

 1,894,811  

 1,914,542  

 1,914,662  

consumption 

of 
Overall 
sweetened/flavoured beer (hl) 
 % 
over 
Change 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)* 
 %  Change  over  revenues  from 
sweetened/flavoured beer 
 %  Change  over  revenues  from 
total beer 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s elaboration of IWSR and EDT series. 
Note: Baseline year: 2015; * Excise duty and VAT on excise duty. 

 12,779,642  

 19,806,253  

 12,794,961  

from 
beer 

no change 

no change 

no change 

no change 

-35.5% 

-35.4% 

-0.9% 

-0.9% 

0.0% 

ITALY 

Ad  discussed  above,  Italy  is  undergoing  a  regulatory  review  process  that  embraces  also  the 
method  for  the  measurement  of  Plato  degree  for  excise  duty  purposes.  According  to  some 
stakeholders,  this  may  eventually  result  in  a  transition  from  approach  B2  to  B1,  but  since  the 
competent authority has not yet adopted the secondary implementing regulation the outcome of 
the process is still uncertain (very likely a decision will be taken after the issuance of the CJEU 
judgement on the Polish case). Whereas taxes are currently computed based on approach B2 in 
this  simulation  Economisti  Associati  assumed  that  the  country  has  completed  its  transition  to 
approach  B1.  It  is  important  to  highlight  that  this  is  a  hypothetical  assumption  made  for 
analytical  purposes.  Under  this  assumption,  approach  B1  is  the  baseline  (and  ‘no  change’ 
scenario) while approach A and B2 are the ‘change scenarios’.  

Due to the country’s relatively high excise duty rate (3.04 per hl/Plato degree) and the narrow 
market for sweetened/flavoured beer, which is dominated by radler, changing the measurement 
approach results in rather high percentage variations in tax revenues (excise duty and VAT on 
excise duty) generated by sweetened/flavoured beer when moving back from approach B1 to B2 
(+72%). Changes from approach B1 to A are rather minor.124 Interestingly, in light of the very 
limited size of the Italian market for sweetened/flavoured beer, any change in consumption and 
tax revenues is marginal compared to the entire market for beer. 

Table  16  –  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Italy  

Option 

 1.A / 2.A 

Approach 

A 

 1.B.1  /  2.B.1  (no 
change) 
B1 
(hypothetical 
dynamic  baseline 
scenario) 

1.B.2 / 2.B.2 

B2 
situation)  

(Current 

124   As discussed previously, as the Italian authorities are still in the process of setting secondary rules to complete 
the transition from approach B2, it is still also possible a transition from B2 to A rather than to B1. In this 
respect,  the  impact  analysis  in  Table  16  confirms  that  approaches  A  and  B1  lead  to  very  similar  results  in 
Italy. Therefore, the findings of the impact analysis performed in the Study remain largely valid, irrespective 
of whether Italy will eventually opt for approach A or B1. 

149 

 
 
 
 
 
 
                                                 
 254  

 238  

 238  

6.8% 

0.1% 

-0.2% 

radler 

 209,213  

 217,246  

 217,481  

no change 

consumption 

Average  price  of 
(EUR/hl)*  
 % Change in price  
Overall 
of 
sweetened/flavoured beer (hl) 
 % 
over 
Change 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)**   
 %  Change  over  revenues  from 
sweetened/flavoured beer 
 %  Change  over  revenues  from 
total beer 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s elaboration of IWSR and EDT series. 
Note:  Baseline  year:  2015;  *Based  on  IWSR  the  Italian  sweetened/flavoured  beer  market  consists  entirely  of  radler;125  ** 
Excise duty and VAT on excise duty. 

from 
beer 

 4,420,685  

 4,519,242  

 7,762,097  

no change 

no change 

no change 

no change 

revenues 

71.8% 

-2.2% 

-3.7% 

0.0% 

0.0% 

0.4% 

0.0% 

POLAND 

In Poland, where tax revenues are the highest among sampled countries due to the larger size of 
the  market  for  sweetened/flavoured  beer,  the  changes  are  modest  in  absolute  terms,  as  the 
market  is  dominated  by  flavoured  beer  other  than  radler  and  the  national  excise  duty  rate  is 
moderate  (EUR  1.86/hl/°  Plato in  2015).  Tax  revenues  (excise  duty  and  VAT  on  excise  duty) 
generated by sweetened/flavoured beer would fall by more than EUR 15 million when changing 
from  approach  B2  (baseline  and  no  change  scenario)  to  A  or  B1,  i.e.  about  -1.5%  when 
compared to total tax revenues on beer (more than one billion EUR). Impacts on consumption 
are  more  limited  (-2.6%  over  consumption  of  flavoured/sweetened  beer;  -0.2%  over  total 
consumption of beer). 

Table  17  –  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Poland  

Option 

 1.A / 2.A 

 1.B.1 / 2.B.1 

radler 

A 

 99  

-9.4% 

other 
beer 

 198  

B1 

 100  

-9.2% 

 197  

Approach 
Average  price  of 
(EUR/hl)  
 % Change in price  
Average  price 
sweetened/flavoured 
(EUR/hl)  
 % Change in price  
Overall 

of 

consumption 

-2.9% 
 2,445,951  

of 

-3.3% 
 2,448,589  

no change 
 2,384,762  

1.B.2  /  2.B.2  (no 
change) 
B2 (Baseline) 

 110  

no change 

 203  

125  

In  Italy  there  is  a  small,  but  declining  market  for  flavoured  beer,  which  appears  not  to  be  recorded  by  IWSR  data. 
Nonetheless, the Italian market for flavoured beer other than radler is dominated by beer with addition of flavour in the 
wort produced by craft brewers; the Plato degree of such beer is not affected by different measurement approaches. Hence, 
IWSR data allows capturing the entire market relevant to the policy problem.  

150 

 
 
 
 
 
                                                 
1.B.2  /  2.B.2  (no 
change) 
B2 (Baseline) 

Option 

 1.A / 2.A 

 1.B.1 / 2.B.1 

A 

B1 

2.6% 

2.6% 

0.2% 

revenues 

Approach 
sweetened/flavoured beer (hl) 
over 
Change 
 % 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)* 
 %  Change  over  revenues  from 
sweetened/flavoured beer 
 %  Change  over  revenues  from 
total beer 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s elaboration of IWSR and EDT series. 
Note: Baseline year: 2015; * Excise duty and VAT on excise duty. 

 56,537,824  

 72,404,261  

 55,445,881  

from 
beer 

no change 

no change 

no change 

no change 

-21.9% 

-23.4% 

-1.5% 

-1.6% 

0.2% 

ROMANIA 

to  approach  B2  would  result 

Finally, Romania would see no change if approach A were selected. Switching to from approach 
A (baseline and no change scenario) to approach B1 would make almost no difference, whereas 
switching 
in  consumption  of 
increase  by  5%;  price  of  other 
sweetened/flavoured  beer  (price  of  radler  would 
sweetened/flavoured beer by 1%) and a 56% increase in tax revenues (including VAT on excise 
duty)  generated  by  this  type  of  beer.  However,  this  corresponds  to  only  -0.1%  in  total  beer 
consumption and +0.8% in total tax revenue from excise duty on beer in Romania (i.e. less than 
EUR 2 million out of more than EUR 195 million). 

in  a  2.3%  decrease 

Table  18  –  Expected  impacts  of  the  proposed  policy  options  on  the  measurement  of  Plato 
degree for sweetened/favoured beer in Romania  

/ 

 1.A 
(no change) 
A (Baseline) 

Option 

of 

 92  

 222  

radler 

no change 

no change 

other 
beer 

consumption 

Approach 
Average  price  of 
(EUR/hl)  
 % Change in price  
Average  price 
sweetened/flavoured 
(EUR/hl)  
 % Change in price  
Overall 
of 
sweetened/flavoured beer (hl) 
over 
Change 
 % 
sweetened/flavoured beer 
 % Change over total beer 
Tax 
sweetened/flavoured 
(EUR)* 
 %  Change  over  revenues  from 
sweetened/flavoured beer 
 %  Change  over  revenues  from  no change 

from 
beer 

no change 

no change 

no change 

revenues 

 369,663  

 2,692,520  

2.A  

 1.B.1 / 2.B.1 

1.B.2 / 2.B.2  

B1 

 93  

0.1% 

 221  

-0.2% 

 369,509  

0.0% 

0.0% 

B2  

 97  

5.1% 

 225  

1.2% 

 361,127  

-2.3% 

-0.1% 

 2,700,865  

 4,190,476  

0.3% 

0.0% 

151 

55.6% 

0.8% 

 
 
 
 
 
total beer 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages"; author’s elaboration of IWSR and EDT series. 
Note: Baseline year: 2015; * Excise duty and VAT on excise duty. 

152 

 
 
 
ANNEX 15.  ASSESSMENT OF THE IMPACT ON THE MARKET OF THE RE-CLASSIFICATION OF 

CERTAIN PRODUCTS 

The  re-classification  of  certain  products  under  a  different  tax  category  with  a  different  excise 
duty  rate  would  clearly  have  an  impact  on  the  market  size  and  trends.  This  impact  has  been 
assessed  triangulating  the  results  of  a  quantitative  market  analysis126  econometric  model  with 
other  evidence  collected  through  interviews  with  stakeholders  and  a  desk  review  of  literature 
and  relevant  documentary  sources.  The  various  steps  of  the  assessment  and  the  findings  are 
described  in  the  following  paragraphs  and  summarised  in  Table  19,  Table  20,  and  Table  21 
below.  

Step 1 – estimating the market size of potentially affected products. This part of the exercise 
was conducted as part of the baseline assessment and led to the quantification of the market size 
of both ‘borderline’ products (mixed drinks and other fermented beverages that might have lost 
their  essential  fermented  character)  and  other  sub-categories  of  products  that  might  be 
unintendedly affected since currently covered by the same Directive provisions at stake (Article 
12 or Article 17). This part of the work required a detailed one-by-one analysis of a vast range 
of specific brand-products listed in the IWSR database. The tax treatment of these products is 
not disclosed so it had to be inferred from e.g. alcoholic strength, estimated alcoholic base and, 
in some cases, market price.  

The sales volume of products with similar characteristics and falling in the same (estimated) tax 
category  were  then  aggregated  into  homogeneous  sub-categories  considered  relevant  for  the 
assessment. The target products include non-spirit mixed-drinks with ABV lower than 5.5% vol 
or lower than 10% vol, and other medium/high strength fermented beverages with an ABV up to 
22%  vol.  Non-target  products  consist  of  certain  aromatised-wine  products  that  are  possibly 
taxed under Article 12, including both CN 2206 and certain CN 2205 products. In practice, non-
target  products  include  product  like  sangria,  gluehwein  (mulled  wine),  and  other  aromatised-
wine cocktails. Economisti Associati also estimated the market of ‘borderline’ cider, in case it 
would  be  included  in  the  scope  of  the  re-classification,  in  line  with  the  approach  outlined  in 
Section  2.1.  Overall,  it  is  estimated  that  ‘target  products’  sales  in  the  EU  amount  to 
approximately 154 mn litres (305 mn litres if ‘borderline’ cider is included127); and non-target 
products  potentially  affected  to  some  106  mn  litres.  As  compared  to  the  total  volume  of 
alcoholic beverages consumed in the EU per year, the products at stake are only a tiny minority, 
i.e. 0.8% of the total.      

The sub-categories are defined assuming that all the encompassed products would change of tax 
category following the adoption of one of the policy options considered. Since the attribution of 
products to a certain sub-category, as well as the very market dimension of these products are 
subject to a certain margin of error, the baseline data used in the analysis should be taken with 
caution.          

126   The  market analysis  is  largely  based  on  the  results  of  an  econometric  modelling  exercise  conducted  on the  market  data 

published by IWSR.   

127   Where not explicitly mentioned, the figures ‘borderline’ cider does not include the UK market. The rationale is that since 
the  UK  market  accounts  alone  to  two-thirds  of  the  EU  cider,  and  is  also  much  greater  than  the  total  market  of  mixed 
drinks, it may ultimately determine the results of the for impact assessment exercise.   Secondly, in the current situation it 
is  very  unlikely  that  the  UK  would  follow  the  EU  in  a  re-classification  process  that  would  affect  primarily  the 
competitiveness of its domestic cider industry.  

153 

 
 
 
 
                                                 
Step 2 - market trends in the absence of policy changes. This step consisted in estimating the 
projected  value  of  the  market  after  one  year  in  the  ‘business  as  usual’  scenario  (i.e.  dynamic 
baseline).  Projections  are  based  on  the  average  growth  rate  observed  over  the  past  five  years. 
Economisti  Associati  limited  the  market  projections  assuming  that  growth  trend  is  linear,  and 
would  remain  similar  also  in  the  following  years.  The  trend  varies  across  sub-categories  of 
product: ‘borderline’ OFB and IP, as well as AWP - CN 2206 are substantially stable, AWP – 
CN 2205 seems declining, while ‘borderline’ cider is growing.  

The  overall  market  change  is  positive,  although  very  modest  in  scale.  The  aggregated  annual 
variation  for these  sub-categories  amount to  less  than 1.0 mn litres,  which is  some +0.2% per 
year. Needless to say, growth trends differ across the MS that have been examined and used to 
extrapolate general EU-level trends.        

Step 3 - revised tax rate due to re-classification. Option I may entail in practice that a certain 
amount of products with a questionable essential fermented character are taxed in accordance to 
Article 20. These may regard both certain Article 12 products (mixed drinks) and, more likely, 
certain  Article  17  products  –  i.e.  medium/high  strength  OFB  currently  considered  as 
Intermediate Products. It is unlikely that any cider including ‘borderline’ ones could be affected. 
Also  CN  2205  products  would  not  be  affected,  since  this  option  concerns  only  CN  2206 
products.  Instead,  some  AWP  classified  as  CN  2206  may  in  theory  (but  not  very  likely)  be 
affected. Similar outcomes could be obtained through non-regulatory options III.a and III.b.   

For Option II Economisti Associati have not envisaged any specific tax rate, since this is outside 
of the scope of this exercise. However, for illustrative purposes, Economisti Associati simulated 
that  of  the  two  categories  created  by  splitting  the  current  OFB  category,  one  would  retain  the 
current  Article  12  tax  rate,  while  the  other  would  be  taxed  with  the  same  rate  of  IP.  The 
simulation  was  conducted  at  the  level  of  each  of  the  six  sample  MS  taking  into  account  the 
different  rates  currently  applied  to  OFB  and  IP  and  the  existence  of  national  non-harmonised 
measures (e.g. pre-mix tax, separate excise duty for cider, application of Article 17(2) etc.).             

Step  4  -  tax-induced  variation  of  the  current  price  levels.  An  important  variable  of  the 
econometric model applied is the extent to which a possible variation in the excise duty rate may 
translate  into  a  variation  of  the  average  price  level  for  a  certain  sub-category.  This  variable  – 
denominated  ‘pass-through’  factor  –  has  been  calculated  for  all  the  categories  of  products 
potentially  concerned  by  re-classification  (intended  and  unintended  ones)  based  on  a  large 
matrix of historical correlation between  tax (including excise duty and the  VAT on the excise 
duty) and price levels in the six sample MS. In practice, the ‘pass-through’ factor expresses by 
how much the selling price of a product would change following a variation of the tax levied. It 
is important to remind that the tax level is only one of the possible explanatory factors behind 
the price level. As most of the interviewees highlighted, prices are only limitedly influenced by 
taxes and more importantly by marketing strategies, production costs, retail mark-ups, etc.     

Fermented  mixed  drinks  below  10%  vol  are  the  only  case  where  no  statistically-relevant 
correlation  could  be  found.  More  than  for  other  beverages,  the  price  of  mixed  drinks  seems 
therefore determined by factors other than the tax level. While this is the case for ordinary and 
modest  variations  of  rates,  in  the  case  of  special  taxes  (pre-mix  or  alcopop  taxes)  explicitly 
conceived to deter consumption, major market impacts were indeed observed, consisting in the 

154 

 
 
   
 
 
massive  withdrawal  of  affected  products  from  the  market.  So,  in  the  model,  Economisti 
Associati assumed for these products a conventional pass-through of 100%.128         

Step  5  -  overall  variation  in  the  demand.  The  main  outcome  of  the  exercise  consisted  in 
estimating the variation of consumers’ demand of products possibly caused by the application of 
a  different tax  rate  -  taking  into  account  the  above  effects on  prices.  This  required  in  the  first 
place to calculate the elasticity of the demand for the various sub-categories of products to re-
classify. Economisti Associati used for this purpose the same large dataset of Step 4. Combining 
the  estimated  variation  in  price  levels  (Step  4)  and  the  elasticity  coefficient,  it  was  eventually 
possible to estimate the variation in the volumes of product demanded potentially caused by the 
two  regulatory  options  at  stake.129  For  a  more  accurate  estimation,  two  different  econometric 
models have been applied to data, which returned partly different results (but coherent in terms 
of general trends). As shown in Table 21, the two models produced a minimum and a maximum 
impact  scenario.  The  ‘mean’  value  between  the  two  endpoints  can  be  taken  as  a  valid 
approximation.   

The  assessment  of  impact  has  been  conducted  on  the  six  sample  MS,  and  the  outcomes  were 
extrapolated at EU level by applying appropriate conversion factors linked to market size. These 
are  smaller  in  the  case  of  mixed  drinks,  IP  and  AWP  –  where  this  sample  accounts  for  some 
47%  of  the  EU  market,  and  bigger  for  cider  –  where  they  represent  only  14%.  The  principle 
behind extrapolation is that the sample is sufficiently representative of the entire EU market, not 
only in quantitative terms but also qualitatively, and in particular that the variety of preferences 
and trends observed in the sample sufficiently reflects the diversity of EU countries. There are a 
couple of limitations in this method that are worth mentioning: (i) the outcomes of the exercise 
aim  at  representing  the  expected  EU-aggregated  impacts,  but  do  not  support  conclusions  on 
impact on individual MS; (ii) the ratio between this sample and EU-level data changes if instead 
of volume of products (in litres) Economisti Associati consider the value of market (in EUR) or 
the amount of excise duty collected. The extrapolation of results for these other variables using 
the volume of consumption as conversion factor inevitably leads to minor calculation distortions 
that could not be entirely corrected.           

The results presented in Table 19 below show that Option I would affect primarily ‘borderline’ 
IP, with a possible reduced volume of sales of ca. -36% (average value between ‘min’ and ‘max’ 
scenarios).130  Mixed  drinks  of  lower  strength  would  also  be  affected,  but  at  a  smaller  degree, 
since the structure of Article 20 is by pure alcoholic degree. Overall, the consumption of target 
products  would  reduce  by  some  42  mn  litres  in  one  year  (average  scenario).  The  collapse  is 
mostly due to the abrupt introduction of a relatively high excise duty on products that in various 
markets currently enjoy a zero or very low excise duty. It is also due to the fact that the demand 

128   Applying a different ‘pass through’ factor to mixed drinks, the model would evidently return different  estimates. In the 
interim stage of the work, we had calculated the impact applying a greater pass-through coefficient (1.5 - prices increase in 
a  greater  proportion  than  the  tax  increase)  and  a  smaller  one  (0.5).  In  the  first  case,  the  impact  on  mixed  drinks  were 
magnified, while in the second case they were mitigated. The two alternative coefficient used were arbitrary, so the results 
had little analytical significance. In the final version of the Study, we have approached the issue of sensitivity of results by 
using  two  different  econometric  models,  and  calculating  an  upper  and  a  lower  threshold  to  the  estimates  provided. 
Therefore, the less-sophisticated simulations by different values of the pass-through coefficient have been dropped.    
129   The  ‘arc  elasticity’  formula  has  been  used  in  this  exercise,  in  consideration  of  the  fact  a  big  variation  is  expected  on  a 
category of products with varying starting prices and sales quantity, and given the absence of a specific demand function 
for  these  products.  In  practice,  as  compared  to  basic  ‘point  elasticity’,  the  arc  elasticity  defines  the  mid-point  elasticity 
between the two selected points and may mitigate somehow the overall effects.  

130   Where not specified all figures in this section refer to the average value between the minimum and maximum scenarios 

provided in Table 19.  

155 

 
 
              
                                                 
of  these  products  is  quite  elastic,  so  the  consumers  would  likely  respond  to  a  price  increase 
turning massively to other products.  

The impact of Option II would be borne in particular by very low-strength mixed drinks and – if 
included  in  the  re-classification  –  by  ‘borderline’  cider.  The  model  predicts  a  sales  drop  of 
respectively  46%  (for  very  low-strength  mixed  drink  –  average  scenario)  and  64%  (for 
‘borderline’  cider  –  average  scenario).  More  moderate  is  the  expected  impact  on  mixed  drink 
between 5.5% and 10% vol, which in some MS are already taxed as Intermediate Products. The 
aggregated market loss would be greater than under Option I, i.e.  – ca. 91 mn litres, primarily 
due  to  the  ‘flat’  nature  of  the  excise  duty  that  would  applied,  whose  burden  is  inversely 
proportional to the ABV strength.  

It is  important  to  highlight  the  estimated effects on  non-target  products.  Under  Option  I  some 
aromatised  wine  products  classified  as  CN  2206  may  unintendedly  fall  in  the  scope  of  re-
classification.  In  this  case,  applying  their  corresponding  pass-through  factors  and  elasticity 
coefficient,  Economisti  Associati  expect  a  reduction  of  sales  from  ca.  36  mn  litres  to  nearly 
zero. The variation would be much greater than for target products. Under Option II, the impact 
on  non-target  products  would  be  equally  profound.  Adverse  market  effects  may  be  registered 
also by some CN 2205 products currently in the remit of Article 12. Overall, the AWP segment 
may register a drop of -74 mn litres (average scenario), i.e. some -70% against the ‘no change’ 
scenario.  

As  discussed,  a  quantitative  assessment  of  the  impact  of  non-regulatory  options  (in  particular 
options III.a and III.b) would be highly speculative, since these options fall outside of the remit 
of excise duty system and/or are non-binding in nature. Nonetheless, since these options would 
essentially clarify the conditions under which certain fermented beverages should be treated like 
spirits, it can be assumed that their impact is conceptually similar to regulatory Option I. This is 
even more so, since Option I de facto requires that operational guidelines are adopted in support 
to the regulatory amendment.        

Table 19 – Estimated impacts of the proposed options on market sales volume  
Product  
categories 

Baseline  
+ 1 year  Range  Option I  Diff. 
(mn 
litres) 

(mn 
litres) 

(mn litres) 

(*) 

Baseline 
2016 
(mn 
litres) 

Option 
II 
(mn 
litres) 

Drinks      

‘Borderline’ OFB  
Mixed 
(<= 5,5% vol) 
Mixed 
(5,5%-10% vol) 
‘Borderline’ cider (OFB)  

Drinks         

73.64 

4.76 

74.34 

5.04 

w/ the UK 

435.27 

459.44 

w/out the UK 

151.80 

153.62 

‘Borderline’ IP  
MHS Ferm. 
(10% - 22% vol) 
Non-target products**  

75.49 

75.48 

AWP 2205 

AWP 2206 

70.12 

36.43 

68.15 

36.43 

TOTAL 

412.23 

413.07 

54.62 
65.87 
4.45 
4.79 

459.44 
459.44 
153.62 
153.62 

40.99 
54.50 

68.15 
68.15 
0.50 
0.61 
322.32 
347.54 

max 
min 
max 
min 

max 
min 
max 
min 

max 
min 

max 
min 
max 
min 
max 
min 

156 

-19.73 
-8.47 
-0.59 
-0.25 

0.00 
0.00 
0.00 
0.00 

-34.50 
-20.98 

0.00 
0.00 
-35.93 
-35.82 
-90.75 
-65.53 

27.92 
51.81 
4.54 
4.82 

97.14 
221.52 
33.80 
77.08 

75.48 
75.48 

29.28 
24.73 
0,00 
5.59 
171.03 
239.52 

Diff. 
(mn 
litres) 

-46.42 
-22.53 
-0.50 
-0.22 

-362.30 
-237.91 
-119.82 
-76.54 

0.00 
0.00 

-38.87 
-43.42 
-36.43 
-30.85 
-242.04 
-173.56 

 
 
 
 
 
  
 
(w/ UK cider)*** 

(695.70) 

(718.88) 

mean 

334.93 
(640.75) 

-78.14 
(-78.14) 

205.27 
(309.16) 

-207.80 
(-409.72) 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages"; author’s estimates, based on a quantitative analysis of IWSR data.  
Notes: The ‘baseline + 1 year’ is estimated on the basis of 2016 data and the average growth rate registered in the 
past five years. 
(*) For each data point a maximum and a minimum impact is provided, based on the results of the two econometric 
models used in the Study.  
(**)  Non-target  products  that  might  be  affected  by  the  policy  options  include  aromatised-wine  products  (AWP) 
falling under CN 2206 or, in some circumstances, under CN 2205. 
(***) Since the UK cider market account for the bulk of EU cider, the impact on this market might determine alone 
the overall results of the exercise. For this reason, the aggregated figures containing the UK cider are provided 
separately.    

Step 6 - overall effects on market value. The reduction in sales has eventually been combined 
with the tax-induced expected increase in prices in order to estimate the scale of the impact in 
terms  of  market  value  (Table  20).  These  are  evidently  negative  due  to  the  expected  market 
decline. In both ‘change scenarios’ considered, the estimate loss would be around EUR 300-400 
mn.  

These  figures  have  to  be  considered  in  the  light  of  an  overall  EU28  market  that  according  to 
IWSR amounts to  EUR  207.2 bn. In  this respect, the products at stake  (target  and non-target) 
represent altogether a small 1%, and the possible value loss would be of 0.2%. Also, it has to be 
considered  that  the  consumption  would  likely  shift  to  other  products,  so  at  systemic  level  the 
variation would be hardly noticeable.            

Table 20 – Estimated impacts of the proposed options on market economic value  

Product  
categories 

Baseline 
2016 
(€ mn) 

Baseline  
+ 1 year 
(€ mn) 

Rang
e 
(*) 

Option I 
(€ mn) 

Diff.  Option II 
(€ mn) 

(€ mn) 

Diff. 
(€ mn) 

Drinks      

‘Borderline’ OFB 
Mixed 
(<= 5,5% vol) 
Mixed 
(5,5%-10% vol) 
‘Borderline’ cider (OFB) 

Drinks         

513.45 

43.74 

510.30 

46.13 

w/ the UK 

2,644.07 

2,790.87 

w/out the UK 

473.16 

478.84 

‘Borderline’ IP 
MHS Ferm. 
(10% - 22% vol) 
Non-target products** 

868.43 

867.17 

AWP 2205 

210.37 

200.89 

AWP 2206 

12.45 

12.46 

TOTAL 

2,121.61 

2,115.79 

max 
min 
max 
min 

max 
min 
max 
min 

max 
min 

max 
min 
max 
min 
max 
min 
mean 

387.11 
459.61 
38.38 
41.63 

2,790.87 
2,790.87 
478.84 
478.84 

-123.19 
-50.69 
-7.76 
-4.51 

0.00 
0.00 
0.00 
0.00 

236.05 
443.94 
39.02 
41.68 

732.70 
1,663.81 
254.95 
578.95 

-274.25 
-66.36 
-7.12 
-4.46 

-2,058.17 
-1,127.06 
-223.89 
100.11 

533.81 
689.96 

-333.35 
-177.21 

867.17 
867.17 

0.00 
0.00 

200.89 
200.89 
3.40 
4.19 
1,642.43 
1,875.10 
1,758.77 
(4,070.80) 

0.00 
0.00 
-9.05 
-8.27 
-473.36 
-240.69 
-357.02 
(-357.02) 

107.52 
92.24 
2.85 
28.69 
1,507.56 
2,052.67 
1,780.11 
(2,561.42) 

-93.37 
-108.65 
-9.60 
16.24 
-608.23 
-63.12 
-335.67 
(-1,866.40) 

(4,292.52) 

(w/ UK cider)*** 
Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages"; author's estimates, based on a quantitative analysis of IWSR data.  
 Notes: The ‘baseline + 1 year’ is estimated on the basis of 2016 data and the average growth rate registered in the 
past five years. 

(4,427.82) 

157 

 
 
 
 
 
  
 
 
(*) For each data point a maximum and a minimum impact is provided, based on the results of the two econometric 
models used in the Study.  
(**)  Non-target  products  that  might  be  affected  by  the  policy  options  include  aromatised-wine  products  (AWP) 
falling under CN 2206 or, in some circumstances, under CN 2205. 
(***) Since the UK cider market account for the bulk of EU cider, the impact on this market might determine alone 
the overall results of the exercise. For this reason, the aggregated figures containing the UK cider are provided 
separately. 

Table  21 – Estimated impacts of the proposed options on tax revenues (excise duty and 
the VAT applied to it) 

Product  
categories 

Baseline  
Baselin
e 2016 
+ 1 year 
(€ mn)  (€ mn) 

‘Borderline’ OFB 

MD very low 

214.97 

213.65 

MD low 

7.62 

8.04 

‘Borderline’ cider (OFB) 

w/UK 

825.28 

871.10 

W/out UK 

344.24 

348.37 

‘Borderline’ IP 

MHS Ferm. 

224.43 

225.03 

Non-target products** 

AWP 2205 

8.15 

7.67 

AWP 2206 

2.61 

3.78 

TOTA
L 

802.01  806.54 

(w/ UK 
cider)*** 

(1,283.
05) 

(1,329.2
7) 

Diff. (w/ 
VAT) 

Diff. 
(only ED) 

(€ mn) 

(€ mn) 

Ran
ge  Option I 
(*) 

Diff. 
(w/ 
VAT) 
(€ mn)  (€ mn)  (€ mn) 

Diff. 
(only 
ED)  

max 
min 
max 
min 

max 
min 
max 
min 

137.21 
170.86 
6.48 
7.30 

871.10 
871.10 
348.37 
348.37 

-76.44 
-42.78 
-1.56 
-0.74 

-62.92 
-35.21 
-1.28 
-0.61 

0.00 
0.00 
0.00 
0.00 

0.00 
0.00 
0.00 
0.00 

Option 
II 
(€ mn) 

100.73 
213.94 
5.99 
6.79 

212.06 
542.48 
73.79 
188.76 

-112.91 
0.29 
-2.05 
-1.25 

-659.04 
-328.62 
-274.58 
-159.61 

max 
min 

137.17 
189.51 

-87.87 
-35.52 

-72.32 
-29.24 

225.03 
225.03 

0.00 
0.00 

max 
min 
max 
min 

7.67 
7.67 
0.32 
0.39 

max  637.21 

min  724.10 
mea
n 

680.65 

(1,203.3
8) 

0.00 
0.00 
-3.47 
-3.39 
-
169.34 
-82.44 
-
125.89 
(-
125.89) 

0.00 
0.00 
-2.85 
-2.79 

37.03 
31.42 
0.00 
11.23 

29.36 
23.75 
-3.78 
7.45 

-139.37  442.57 

-363.97 

-299.57 

-67.86 

677.17 

-129.37 

-106.48 

-103.61  559.87 

-246.67 

-203.02 

(-
103.61) 

(805.87) 

(-523.41) 

(-430.79) 

-92.93 
0.24 
-1.69 
-1.03 

-542.42 
-270.47 
-225.99 
-131.36 

0.00 
0.00 

24.16 
19.55 
-3.11 
6.13 

Source:  Economisti  Associati,  "Study  on  Council  Directive  92/83/EEC  on  the  structures  of  excise  duty  on 
alcohol and alcoholic beverages"; Author’s estimates based on a quantitative analysis of IWSR data.  
Notes: ED: Excise duty (revenue); w/ VAT: excise duty augmented with the applicable VAT. The average EU28 
VAT rate is conventionally applied (21.5%).       
The ‘baseline + 1 year’ is estimated on the basis of 2016 data and the average growth rate registered in the past 
five years.  
(*)  For  each  data  point  a  maximum  and  a  minimum  impact  is  provided,  based  on  the  results  of  the  two 
econometric models used in the Study.  
(**) Non-target products that might be affected by the policy options include aromatised-wine products (AWP) 
falling under CN 2206 or, in some circumstances, under CN 2205. 
(***)  Since  the  UK  cider market  account for  the bulk of  EU  cider,  the  impact  on  this  market  might determine 
alone  the  overall  results  of  the  exercise.  For  this  reason,  the  aggregated  figures  containing  the  UK  cider  are 
provided separately. 

158 

 
 
 
 
 
 
 
 
 
ANNEX 16.  PROBLEMS THAT WILL NOT BE ADDRESSED WITHIN THIS IMPACT ASSESSMENT 

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 the Ramboll 
Evaluation, will not be further considered in this impact assessment for the reasons explained 
below. 

All stakeholders consulted and data analysed suggest that the private production of fermented 
beverages does not create any significant problems to the internal market, either economic or 
regulatory. Public authorities reported no cases where home brewing was linked to tax frauds 
and there are no indications of any competition distortion. 

Private production of ethyl alcohol131 and intermediate products (IP) was not granted in 1992 
for both health and tax reasons. Distillation is more dangerous than fermentation from a health 
perspective and given the higher excise duties on ethyl alcohol, the risk of tax fraud is higher. 
According  to  the  Study,  the  amount  of  illicit  private  distillation  is  estimated  to  be  low  and 
likely to decrease in the future. This decrease is due to several factors which are: 

  A decline in total alcohol consumption, 
  Lower number of people living in rural areas,  
  Changes in consumers' lifestyle and preferences,  
 
  An increase in the accessibility of alcohol, and  
  The loss of traditional production methods and techniques.  

Increase in disposable income, 

The  Study  considered  the  possibility  of  extending  the  optional  exemption  for  private 
production and home consumption to ethyl alcohol and IP to address this discrimination. The 
extension of this optional exemption to the private production of ethyl alcohol and IP would 
have  modest  but  negative  impacts  on  tax  revenues  and  market  effects.  54%  and  38%  of 
respondents  to  the  OPC  opposes  the  extension  of  possible  tax  exemptions  to  the  private 
production of ethyl alcohol and IP, respectively. The number of respondents in favour of the 
extension was, for both categories, slightly less than one third of the total, with the balance of 
respondents  expressing  a  neutral  position.  MS  where  private  distillation  is  not  allowed 
maintain that the situation should not change for the following reasons: 

1.  
2. 

3.  

The health risks associated with methanol poisoning, 
The possible increase in the consumption of spirits due to the liberalisation of 
private distillation, 
Ethyl alcohol presents a higher risk of frauds. 

The  Council  mandate132  explicitly  called  for  the  right  balance  to  be  struck  between  an 
extension  of  the  exemption  to  all  alcoholic  beverages  and  the  risk  of  (unintended)  negative 
effects. Therefore based on the feedback from the stakeholders and the Council mandate, the 
exemption for private production is not taken into account in this impact assessment.  

131   Private distillation is possible in Austria and Romania. These provisions reportedly find their justification in the minutes 
of  the  Council  meeting  at  which  the  Directive  was  adopted,  stating  that  MS  were  allowed  to  maintain  'traditional 
exemptions' for the private production of any alcoholic beverage.  
'Council Conclusions on the Commission Report to the Council on the evaluation of Council Directive 92/83/EEC on 
the structures of excise duties on alcohol and alcoholic beverages', 06.12.2016 

132  

159 

 
 
 
 
 
 
 
 
 
 
                                                 
ANNEX 17.  COMPARISON OF IMPACTS OF ALTERNATIVE OPTIONS 

Dysfunctions in the application of exemptions for denatured alcohol 

Table 22 - Comparison of impacts addressing option on mutual recognition of CDA 
Impact 
target groups 

1 - Clarify mutual recognition 

0 - No Change  

area 

and 

Functioning  of 
the 
Single  Market  and 
competition 

0 

Operating  costs  and 
conduct of business 

0 

problems 

Most 
by 
adoption  of  CIR  2017/2236;  no 
further change. 

resolved 

problems 

Most 
by 
adoption  of  CIR  2017/2236;  no 
further change. 

resolved 

/ 

0 
+1 

/ 

0 
+1 

remaining 

Reduction  of  any 
trade 
barriers  and  distortions  due  to  possible 
restrictive 
interpretation  of  mutual 
recognition by some MS. 
No  impact  on  most  businesses,  as  this 
would  only  codify  the  approach  already 
taken by most MS. 
Minor  positive  impacts  for  producers 
that  sell  CDA  to  MS  with  different 
national formulations, and users of CDA 
in these MS. 

Enforcement costs for 
national authorities 

0  No change. 

0 

No change. 

0 

fraud 

and 
revenue, 

Risk  of  fraud  with  CDA  reduced 
significantly  by  adoption  of  CIR 
2017/2236; no further change. 

Fiscal 
associated 
health risk 
Source:  Economisti  Associati,  "Study  on  Council  Directive  92/83/EEC  on  the  structures  of  excise  duty  on 
alcohol and alcoholic beverages", 2017; 
Legend: +2 major positive effect expected;  +1 moderate positive effect expected;  0 no effect or neutral impact 
expected; -1 moderate negative effect expected; -2 major negative effect expected. 

No change. 

0 

Table  23  –  Comparison  of  impacts  of  options  addressing  problems  stemming  from  the 
proliferation of national approaches to PDA 
Impact  area 
and 
target 
groups 

2 
Partial 
harmonisation  of  PDA 
formulations 

3 
capacity 
measures 

/ 
building 

0 - No Change  

-  Confidence 

4  –  Legal  clarification  of 
provisions relating to PDA 

- 

Highly uncertain – 
may 
to 
lead 
reduced  barriers  if 
MS  adopt  more 
consistent  rules  / 
practices 
a 
result 

as 

More  equal  treatment  of 
goods containing PDA 
Equality  of  treatment  of 
indirect  uses 
PDA 
across the EU 

for 

+
1 

Highly uncertain – 
may 
to 
lead 
if 
reduced  costs 
MS  adopt  more 
consistent  rules  / 
practices 

0
/
+
1 

Cost  savings  for  users  of 
PDA  in  MS  that  currently 
do  not  exempt 
indirect 
uses. 
Lower risk of delays / costs 
associated  with  disputes 
with customs. 
in 
Potential 
movement 
a 
limited number of products 

increases 
cost 

for 

Functioning 
of  the  Single 
Market 
and 
competition 

0 

change 

No 
expected 

+1 

Operating 
costs 
conduct 
business 

and 
of 

0 

change 

No 
expected 

+1 

0

/ 
+
1 

0

/ 
+
1 

Reduced  barriers  to 
trade, 
intra-EU 
competition 
fairer 
between 
PDA 
producers  and  users 
in different MS  

Benefits  for  PDA 
producers  and  users 
that operate in more 
than one MS 
Possible  positive  or 
negative  effects  for 
users  depending  on 
the 
whether 
harmonised 
is 
less 
or 
more 
exhaustive  than  the 
current national one 

list 

160 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impact  area 
and 
target 
groups 

0 - No Change  

- 

Partial 
2 
harmonisation  of  PDA 
formulations 

Enforcement 
costs 
for 
national 
authorities 

0 

change 

No 
expected 

fraud 

Fiscal 
and 
associated 
revenue, 
health risk 

0 
/ 
-
1 

Adoption  of 
Eurodenatur
ant  for  CDA 
may displace 
fraud 
towards 
PDA 

-1 
/ 
+1 

0 / 
+1 

Short-medium  term: 
significant resources 
required 
for 
developing 
harmonised list 
Medium-long  term: 
for 
cost 
savings 
authorities 
incl. 
laboratories 

risk  of 
Reduced 
fraud 
involving 
products  containing 
‘weakly’  denatured 
alcohol 
‘low 
fiscal  risk’  criterion 
is 
implemented 
strictly) 

(if 

4  –  Legal  clarification  of 
provisions relating to PDA 

0  No change expected 

-  Confidence 

/ 
building 

funding  via 
Fiscalis 

3 
capacity 
measures 
EU 
the 
programme 
MS  human  and 
financial resources 
May 
to 
if  MS 
savings 
more 
adopt 
efficient 
/ 
practices 

rules 

lead 

/ 
0 

-
1

0

/ 
+
1 

Highly uncertain – 
to 
may 
lead 
reduced 
if 
MS  adopt  stricter 
rules / practices 

risks 

+
1 

for 

scope 

Reduced 
intentional 
misclassification  of  PDA 
so as to avoid controls 

Source:  Economisti  Associati,  "Study  on  Council  Directive  92/83/EEC  on  the  structures  of  excise  duty  on 
alcohol and alcoholic beverages", 2017; 
Legend: +2 major positive effect expected;  +1 moderate positive effect expected;  0 no effect or neutral impact 
expected; -1 moderate negative effect expected; -2 major negative effect expected. 

161 

 
 
 
 
 
 
Dysfunctions in the classification of certain alcoholic beverages 

Table 24 – Comparison of impacts: review of the scope of OFB category 

Impact area   0) No Change  

I)  Clarify  the  excise  duty  structure  for 
‘borderline’  products  including  AFC 
containing products 

II)  Introducing  a  differentiation  in  the 
OFB tax category 

III  &  IV)  Other  approaches  not 
requiring a revision of the Directive 

Competition 
and  market 
effects 

Tax 
revenues  

0 

0 / -
1 

+1 

0 

-1 

and 

Other  factors  than  taxes  influence 
market 
competition  more 
pervasively. 
Very  limited  cases  of  competition 
distortion 
change 
expected. 

reported.  No 

/ 

0 
+1 

‘borderline’ 
in 

Re-classification  would  lead  to  a 
in  sales  of 
significant  reduction 
products 
certain 
especially 
category  of 
‘borderline’ 
redressing  some 
apparent malfunctioning. 
However,  several  non-target  CN 
2206 products would be unintendedly 
affected.  

the 

IP, 

It is possible (not demonstrated) that 
the  ambiguity  of  the  text  constrains 
market 
for  AFC 
development 
products in certain MS. 

0 / -
1 

the 

the  magnitude  of 

Tax  revenues  have  kept  increasing 
and 
issue 
potentially  caused  by  borderline 
products is modest and declining.  
No  relevant  change  expected  if  the 
treatment  of  AFC  in  products  is 
clarified. 
Enhanced  monitoring  and  control 
(using EPC): 
In  the  few  MS  with  different  excise 
rates  for  wine  and  OFB,  the  risk  of 
translate 
‘misclassifications’  may 
into  incorrect  excise  duty  levied  and 
potential  loss.  The  issue  would  be 
magnified by a possible adoption of a 

0 

0/ 
-1  

More  clarity  and  predictability  may 
support AFC market growth. 
In  absolute  terms,  the  volume  of 
products  at  stake  is  very  modest,  so 
limited  change  in  the  overall  market 
would be perceived. 

The  net  effect  on  tax  revenues  is 
the 
moderately  negative  due 
estimated elasticity of demand. 
No  losses  are  actually  expected  due 
to  substitution  with  other  products 
that would likely occur.   

to 

No major changes expected. 
The  adoption  of  a  fixed  threshold  - 
higher  than  the  strictly  necessary 
dose  -  may  translate  in  an  excessive 
amount  of  alcohol  (AFC)  that  is  not 
taxed as ‘ethyl alcohol’. 

0 /  
-1 

Market  impact  depends  on  the  tax 
rate  applied  to  the  new  category:  an 
IP-like  treatment  would  lead  to  a 
collapse  of 
low  strength  mixed 
drinks,  ‘borderline’  cider  as  well  as 
other non-target products. 
Drawing  a demarcation  line  between 
‘traditional’  cider  and  ‘mass-market’ 
products  is  sensitive  and  may  easily 
result in competition issues.   

/ 

0 
+1 

CN  / CNEN review  and guidelines 
may  have  similar  benefits  and 
drawbacks as (I). 

Sectoral  legislation  for  cider  may 
the  risk  of  competition 
reduce 
issues.  

-1 

Risk  of  losses  if  the  tax  rate  applied 
is high (a ‘per ABV’ structure would 
have more balanced impacts).  
As  for  option  (I)  substitution  would 
mitigate losses. 

0 

+1  

CN  / CNEN review  and guidelines 
are  likely  to  have  the  same  impact 
as option (I). 

tax 

Enhanced  monitoring  and  control 
(using EPC): 
The risk of ‘misclassifications’ and 
ensuing 
losses  would  be 
bridged.  
Furthermore,  there  would  be  more 
clarity  in 
treatment  as 
Article  8  or  Article  12  of  certain 
aromatised  wine  products,  useful 
for market monitoring purposes.   

the  tax 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
separate 
OFB. 

tax  category  for  certain 

+1 

CN / CNEN review and guidelines: 
Like  option  (I),  but  with  reduced 
initial  costs,  since  no  action  at  the 
level  of  the  excise  duty  system  is 
required. 

Administrati
ve burden 

+1 

in  absolute 

Limited 
terms  and 
declining,  thanks  to  the  adoption  of 
MS level approaches. 

Enhanced  monitoring  and  control: 
not relevant 

-1  / 
+1 

Negative  in  the  short  term  due  to 
one-off initial costs. 
Positive  in  the  long  term  due  to 
reduction  of  the  burden  to  deal  with 
complex cases. 

-1 

Negative in the short term (as option 
I),  with  extra  costs  envisaged  for 
updating the system.  
Not  so  effective  in  reducing  the 
burden from complex cases. 

-1 

and 

and 

both 

technical 
for 

Enhanced  monitoring  and  control: 
revisions 
Legal 
economic 
required, 
operators 
competent 
authorities. 
If  the  required  changes  are  limited 
to  the  OFB  economic  operators 
level  of 
directly  concerned 
administrative 
would 
remain modest. 

the 
burden 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages", 2017, based on a quantitative analysis 
of IWSR data.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dysfunctional application of reduced rates 

Table 25 – Comparison of impacts of reduced rates for small brewers  

Impact area and 
target groups 

No change 

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

Option 1.b – creating conditions for 
recognition of small brewers across 
the EU 

Administrative 
burdens for 
economic 
operators 

Enforcement 
costs for public 
authorities 

SME 
competitive-ness 

Cross-border 
market effects for 
economic 
operators 

+0 

0/ -
1 

The reduced rates for 
small brewers do not 
generate unnecessary 
administrative 
burdens and no 
evolution is expected. 

Enforcement costs are 
considered to be 
minimal by tax and 
customs authorities. 
Increased complexity 
and cross-border 
flows may lead to 
small incremental 
costs.  

0 / 
+1 

More players are 
likely to benefit from 
the reduced rates, 
given the growth of 
the small brewery 
market segment. 

0 / 
-1 

The expected increase 
in cross-border flows 
may lead to a modest 
increase in the 
impacts of the minor 
disturbances to the 
Single Market 
identified.  

0/ 
-1 

-1 

+1 

+1 

The administrative burdens 
would be minimal 
irrespective of the 
approach (a non-binding 
instrument or a legislative 
revision. 

0/ -1 

A small increase of 
administrative burdens could be 
expected in case a uniform 
certificate for small brewers is 
introduced. Impact is estimated 
at 7.5% of the current burdens. 

The enforcement costs 
would be minimal 
irrespective of the 
approach (a non-binding 
instrument or a legislative 
revision. 

-1/ -2 

Public authorities would incur 
additional costs if the ex-ante 
uniform certificate is adopted. 
Enforcement costs would be 
concentrated in countries not 
having implemented the 
reduced rates for small 
economic operators. 

An improvement in the 
legal clarity would have a 
positive impact on SME 
competitiveness. However, 
the magnitude could differ 
if MS decide not to 
conform to the non-binding 
guidelines. 

An improvement in the 
legal clarity would have a 
positive impact on the 
cross-border functioning of 
the scheme. However, the 
magnitude could differ if 
some MS decide not to 
conform to the non-binding 
guidelines. 

More legal clarity and ease of 
doing business for cross-border 
economic operators would 
improve the competitiveness of 
SME, and facilitate the 
consolidation of medium 
players. However, given the 
limited scale of the problem, 
positive impacts are expected to 
be modest. 

A more uniform approach to the 
application of reduced rates to 
small brewers would facilitate 
the ease of doing business for 
cross-border economic 
operators. However, given the 
limited scale of the problem, 
positive impacts are expected to 
be modest. 

+1 

+1 

Legend:  +2  major  positive  effect  expected;  +1  moderate  positive  effect  expected;  0  no  effect  or  neutral  impact  expected;  -1 
moderate negative effect expected; -2 major negative effect expected. 

Table 26– Comparison of impacts of reduced rates for small cider makers  

Impact area and 
target groups 

Tax revenues for 
public authorities 

No change 

Introducing reduced rates to small cider 
makers 

0  

Reduced rates cannot be granted to 
small producers of OFB, and thus 
no costs arise for public budgets. 

0/ -1 

Impacts are estimated as negligible in 
most of the sample MS, and modest in 
Ireland and the UK. Total foregone 
revenues at EU level estimated at about 
EUR 15 mn. 

164 

 
 
 
 
 
 
Impact area and 
target groups 

Market effects for 
economic operators 

Health impacts for 
consumers 

SME competitive-
ness 

Administrative 
burdens for economic 
operators 

Enforcement costs 
for public authorities 

No change 

Introducing reduced rates to small cider 
makers 

The regulatory framework for 
alcoholic beverages foresees 
different treatment for different 
producers. However, the situation 
is not expected to change.  

+1 

Small cider makers would gain 
relatively to large producers. Market 
effects are estimated to remain small, 
given the limited amount of sales 
covered by the reduction. 

As there are no reduced rates for 
OFB, per capita alcohol 
consumption is not affected. 

0 / -1 

Current competitiveness of small 
producers will remain unchanged if 
no intervention is brought forward. 

+2 

At EU level, the amount of alcoholic 
beverages concerned is very limited. 
Impacts could be noticeable only in MS 
with a large cider market (such as UK 
and Ireland). 

The competitiveness of small cider 
makers would be greatly enhanced by 
the provision. Diseconomies of scale 
and market access barriers could be 
counterbalanced. 

The lack of reduced rates for OFB 
generates no administrative 
burdens. 

0 / -1 

Administrative burdens for beneficiaries 
from reduced rates are estimated to be 
negligible, at 0.32 €/hl. 

0  

0 

0 

0 

0  

The lack of reduced rates for OFB, 
generates no enforcement costs for 
public authorities. 

0/ -1  

The number of economic operators 
concerned, the amount of excise 
revenues at stake, and the marginal role 
of cross-border trade would not require 
significant additional resources.  

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic 
beverages", 2017.  
Legend:  +2  major  positive  effect  expected;  +1  moderate  positive  effect  expected;  0  no  effect  or  neutral  impact  expected;  -1 
moderate negative effect expected; -2 major negative effect expected. 

Table 27 – Comparison of impacts on increasing the threshold of reduced rates for low-strength 
beer  
Impact area  

Revised threshold for low strength beer 

No Change  

Tax revenues 

Market effects 

0 

0 

MS  will  keep  applying  the 
current  structure  and  excise 
duty rates. 

-1 

in 

change 

No 
taxation; 
therefore,  no  change  in  price 
and consumption. 

+1 

Public health  

0 

No  change  in  consumption, 
impacts  on 
therefore,  no 
public health. 

-1 

lower 

In  MS  opting  for  the  new  provision,  an 
additional  share  of  beer  consumed  will 
benefit  from  reduced  rates,  thus  tax 
revenues would decline. 
In MS opting for the new provision, low-
strength  beer  will  pay 
tax. 
Depending  on  the  extent  to  which  the 
discount  is  passed  on  to  consumers,  its 
price  will  decline  and  its  consumption 
will increase. 
Public  health  impacts  are  negligible  due 
to 
in 
limited  consumption  growth 
absolute terms (up to 0.1 L per capita of 
additional  beer  consumption)  but  some 
population  groups  e.g.  youth,  (pregnant) 
women could be adversely affected. 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages", 2017.  
Legend:  +2  major  positive  effect  expected;  +1  moderate  positive  effect  expected;  0  no  effect  or  neutral  impact 
expected; -1 moderate negative effect expected; -2 major negative effect expected. 

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

165 

 
 
 
 
Table  28  –  Comparison  of  impacts  of  alternative  methods  for  measuring  the  Plato  degree  of 
sweetened / flavoured beer  

Impact area 

No 
baseline 

Change/ 

Option 1.A/2.A 

Option 1.B.1/2.B.1 

Option 1.B.2/2.B.2 

Tax revenues 

0 

MS  will  keep 
applying  their 
preferred 
approach. 

-1 

Economic 
effects 

0 

Market effects 

-1 

No  change  in 
taxation; 
therefore,  no 
in 
change 
price 
and 
consumption. 

+1 

Some 
competition 
distortions  in 
MS  applying 
approach  B2 
are  possible, 
and may grow 
the 
with 
growth 
of 
sweetened/fla
voured 
beer 
market. 

+1 

Public health 

0 

No  change  in 
consumption. 

0 

Enforcement 
costs 

0 

MS  will  keep 
applying 
current 
enforcement 
procedures. 

-1 

Litigation 
costs 

+1 

The  pending 
CJEU 
judgment  (C-
30/17)  may 

+1 

Plato 
Lower 
degree 
for 
sweetened/flavour
ed beer.  
Most  MS  will 
to  change 
have 
their 
current 
approach. 
In  most  MS, 
sweetened/flavour
ed  beer  will  pay 
lower 
tax. 
Depending  on  the 
to  which 
extent 
is 
the  discount 
passed 
to 
consumers,  price 
will  decline  and 
consumption  will 
increase.  

on 

No 
relevant 
disparities  in  the 
level  of  taxation 
of 
sweetened/flavour
ed 
and 
beer 
standard  beer  of 
the  same  alcohol 
strength. 

health 
Public 
are 
impacts 
negligible  due  to 
limited 
consumption 
growth. 
Most  MS  will 
have to implement 
new  enforcement 
procedures  to  test 
the  Plato  degree 
of 
sweetened/flavour
and 
ed 
beer 
on-site 
perform 
checks. 
at 
Coordination 
the 
level 
EU 
required  for  beer 
across 
moved 
borders.  
Increased 
legal 
certainty  (yet,  in 
the  short-run  non-
binding guidelines 

-1 

+1 

+1 

0 

-1 

Lower  Plato  degree 
for 
sweetened/flavoured 
beer.  
Most  MS  will  have 
to 
their 
change 
current approach. 

most  MS, 
In 
sweetened 
/ 
flavoured  beer  will 
tax. 
pay 
lower 
the 
Depending  on 
extent  to  which  the 
discount  is  passed 
on 
to  consumers, 
price  will  decline 
and 
consumption 
will increase. 

0 

0 /-
1 

relevant 
No 
disparities 
the 
in 
level  of  taxation  of 
sweetened/flavoured 
beer  and  standard 
beer  of 
the  same 
alcohol strength. 

0 /-
1 

health 
Public 
are 
impacts 
negligible  due 
to 
limited consumption 
growth. 

 0 

to 

Most  MS  will  have 
to  implement  new 
enforcement 
procedures 
test 
the  Plato  degree  of 
sweetened/flavoured 
beer  and  perform 
on-site checks. 
Coordination  at  the 
level  required 
EU 
for 
beer  moved 
across borders. 

+1 

Higher Plato degree for 
sweetened/flavoured 
beer.  
Few  MS  will  have  to 
change 
their  current 
approach. 

MS, 

to  which 

In 
few 
sweetened/flavoured 
beer  will  pay  higher 
tax.  Depending  on  the 
the 
extent 
additional  tax  is  passed 
on  to  consumers,  price 
and 
will 
increase 
will 
consumption 
decrease. 

Possible  disparities  in 
the  level  of  taxation  of 
sweetened/flavoured 
beer  and  standard  beer 
of 
the  same  alcohol 
strength.  Since  most  of 
adopt 
already 
MS 
approach  B2  and  the 
market 
these 
of 
products  is  small,  the 
on 
overall 
market 
functioning 
would be modest. 

impact 

Public  health  impacts 
are  negligible  due  to 
limited 
consumption 
reduction. 

the 

All  MS  will  be  able  to 
Plato 
measure 
degree 
of 
sweetened/flavoured 
beer  based  on 
analysis  of 
product  

the 
the  final 

Increased 
legal 
certainty (yet, in the 
non-
short-run 
binding  guidelines 

+1 

Increased 
legal 
certainty  (yet,  in  the 
short-run  non-binding 
guidelines may increase 

+1 

166 

 
 
 
may 
litigation costs). 

increase 

may 
litigation costs). 

increase 

litigation costs). 

eventually 
shed  light  on 
the 
correct 
interpretation 
of  the  terms 
‘finished 
product’. 

Source: Economisti Associati, "Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol 
and alcoholic beverages", 2017.  
Legend:  +2  major  positive  effect  expected;  +1  moderate  positive  effect  expected;  0  no  effect  or  neutral  impact 
expected; -1 moderate negative effect expected; -2 major negative effect expected. 

167 

 
 
 
 
ANNEX 18.  MONITORING AND EVALUATION OF IMPACTS 

Problem 
area 

Expected 
result/impact
s 

Indicators (examples) 

Dysfunctions 
in 
the 
application 
of 
denatured 
alcohol 

the 

increased 
legal 
certainty 
economic 
operators 

for 

adoption 

gradual 
of 
Eurodenaturant  by  all  MS 
or  full  recognition  of  all 
notified 
national 
denaturation methods 

instances  of 
number  of 
non-recognition 
of 
denaturing  methods  of 
other MS 

M
133  

 

 

number  of 
instances  of 
diverging  application  as  to 
the indirect use of PDA 

 

reduced 
distortion  of 
competition/ 
market 
barriers 

instances  of 
number  of 
non-recognition 
of 
denaturing  methods  of 
other MS 

 

number  of 
instances  of 
diverging  application  as  to 
the indirect use of PDA 

 

more  equal  treatment  of 
goods containing PDA 

costs  savings  for  users  of 
PDA  in  MS  that  currently 
do  not  exempt 
indirect 
uses or through lower risks 
of  delays  and  associated 
costs 

on 

and 

to 

impact 
regulatory 
costs 
burdens 
related 
recognition 
process 

contribution 
to 
strengthening 

reduced  instances  and/or 
reported  amounts  of  fraud 
unrecorded 
and 

E 

Data sources/frequency134 

Commission 
statistics/analysis (S/R) 

excise 

Complaints (O) 

Infringement cases (O) 

the 

ExComm 

Works 
Committee (R) 

of 

Complaints (O) 

Infringement cases (O) 

the 

ExComm 

Works 
Committee (R) 

of 

Complaints (O) 

Infringement cases (O) 

the 

ExComm 

Works 
Committee (R) 

of 

Complaints (O) 

Infringement cases (O) 

Works 
Committee (R) 

of 

the 

ExComm 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

Market/sector analysis (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

 

 

 

133   Monitoring will be done in the context of works of the Committee on Excise Duties. 
134  

O – ongoing; E – evaluation, at the earliest every 5 years; R – at regular intervals, e.g. annual or bi-annual 

depending on the nature of the data or the data collection method; S – statistics; 

168 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
fight 
the 
against  fraud 
and 
tax 
evasion 

consumption 

scope 

reduced 
international 
misclassification of PDA 

for 

Market/sector analysis (E) 

 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires  to/interviews  with 
industry (E) 

Problem 
area 

Expected 
result/impact
s 

Indicators (examples) 

M  

E 

Dysfunctions 
in 
the 
classification 
of 
certain 
alcoholic 
beverages 

increased 
legal 
certainty 
economic 
operators 

for 

cross-country 
reduced 
disparities 
through 
(e.g. 
harmonised  definitions  of 
certain  OFB  or  common 
rules and methods) 

 

number  of 
misclassified products 

instances  of 

 

reduced 
distortion  of 
competition/ 
market 
barriers 

on 

impact 
regulatory 
and 
costs 
burdens  from 
reclassificatio
n of OFBs 

impact  on  tax 
revenues 
from 
reclassificatio
n of OFBs 

on 
impact 
market 
size 
and trends for 
OFBs 

instances 

of 
reduced 
'classification shopping' for 
more 
tax 
favourable 
classification 

reduced  (legal)  costs  of 
misclassified 
OFB 
products 

costs  for  adapting  existing 
and 
systems 
(IT) 
implementing new rules 

amount  of  excise  duties 
collected 

prices  of  and  demand  for 
reclassified OFBs 

market  structure  for  OFB 
products and for non-target 
(reclassified 
products 
products, 
withdrawn 
products,  novel  products, 
etc.); 

169 

Commission 
statistics/analysis (S/R) 

excise 

Works 
Committee (R) 

of 

the 

ExComm 

Complaints (O) 

Infringement cases (O) 

Works 
Committee (R) 

of 

the 

ExComm 

Market/sector analysis (E) 

Questionnaire  to/interviews  with 
excise administrations (E) 

 

Questionnaires to/interviews  with 
industry (E) 

 

 

Questionnaires to/interviews  with 
industry (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

 

Statistics (S) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Problem 
area 

Expected 
result/impact
s 

Dysfunction
al 
application 
of 
rates  

reduced 

increased 
legal 
certainty 
small 
producers 

for 

reduced 
distortion  of 
competition/ 
market 
barriers/ 
market 
discriminatio
n 
producers 

for  small 

on 

impact 
regulatory 
costs 
and 
burdens  from 
application  of 
reduced rates 

Indicators (examples) 

M  

E 

reduced 
cross-country 
disparities  and  recognition 
of small brewers across the 
EU  

cases 

instances  of 
number  of 
the 
on 
CJEU 
interpretation  of  eligibility 
criteria 

improved  competitiveness 
of the small producers (e.g. 
off-setting 
production 
costs  and  diseconomies  of 
scale  for  small  producers, 
especially of cider) 

of 

reported 
number 
market 
of 
instances 
distortion  with  respect  to 
competitive  disruptions  or 
unfair tax competition as a 
result  of  unavailability  of 
reduced rates 

results  of  the  analysis  of 
impact  on  market  size  and 
trends 
alcoholic 
beverages 

for 

reduced  costs  (legally  and 
economically  independent) 
for small producers 

eligibility 
facilitated 
(enforcement 
controls 
costs) 
tax 
for 
administrations,  including 
in cross-border aspects 

regulatory  costs  linked  to 
and 
implementation 
enforcement 
of 
certification 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires to/interviews  with 
industry (E) 

the 

ExComm 

Works 
Committee (R) 

of 

Complaints (O) 

Infringement cases (O) 

 

 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

 

Statistics (S) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

 

Statistics (S) 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

 

 

 

Statistics (S) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

impact  on  tax 
revenues  

amount  of  excise  duties 
collected and forgone  

 

ratio  of 
collected 

excise  duties 
regulatory 
to 

 

Commission analysis (E) 

Questionnaire  to/  interviews  with 

170 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
on 
impact 
size 
market 
and trends for 
alcoholic 
beverages  

Problem 
area 

Unclear 
provisions  to 
measure 
Plato  degree 
for 
sweetened 
flavoured 
beer  

/ 

Expected 
result/impact
s 

increased 
legal 
for 
certainty 
producers  of 
sweetened 
and  flavoured 
beer 

of 
the 

reduced 
distortion  of 
competition 
between 
products 
which 
alcoholic 
strength  was 
calculated 
based 
different 
methods  

on 

(or 

costs 
thereof)   

perception 

excise administrations (E) 

prices  of  and  demand  for 
products  enjoying  reduced 
rates and other  

Market/sector analysis (E) 

 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

 

structure 

for 
market 
products  enjoying  reduced 
rates  and  other,  including 
cross-border trade 

effect 

substitution 
and 
deflection  in  consumption 
patterns  (particularly  with 
to 
regards 
lower/higher 
alcoholic 
drinks) 

to  switching 

economic 
thresholds 

relevance  of 

 

Questionnaires to/interviews  with 
industry (E) 

Market/sector analysis (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Indicators (examples) 

M  

E 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires to/interviews  with 
industry (E) 

Works 
Committee (R) 

of 

the 

ExComm 

Infringements (O) 

reduced 
disparities  

cross-country 

 

cases 

number  of 
CJEU 
interpretation 
calculation method 

instances  of 
the 
on 
of 

 

of 

reported 
number 
market 
of 
instances 
distortion  with  respect  to 
competitive  disruptions  or 
unfair tax competition as a 
result  of  the  application  of 
different methods 

results  of  the  analysis  of 
impact  on  market  size  and 
trends  for  sweetened  and 
flavoured beer 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

171 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
on 

impact 
administrativ
e  costs  and 
burdens  from 
to 
switching 
another 
calculation 
method 

impact  on  tax 
revenues  

impact 
on 
size 
market 
and trends for 
sweetened 
and  flavoured 
beer  

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

 

Questionnaire  to/  interviews  with 
excise administrations (E) 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

(legal, 
costs 
incurred 
economic) for producers of 
sweetened  and  flavoured 
beer  from  switching 
to 
other calculation method 

regulatory  costs  linked  to 
adaptation 
national 
of 
monitoring  and  control 
systems 

amount  of  excise  duties 
collected from each type of 
product  of  which 
the 
strength  was 
alcoholic 
on 
calculated 
methods 
different 
(including ABV vs Plato) 

based 

 

prices  of  and  demand  for 
sweetened  and  flavoured 
beer  

Market/sector analysis (E) 

 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

structure 

market 
for 
sweetened  and  flavoured 
beer 

effect 

substitution 
and 
deflection  in  consumption 
patterns  (particularly  with 
regards 
to 
other  types  of  alcoholic 
drinks) 

to  switching 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Statistics (S) 

Market/sector analysis (E) 

Questionnaires to/interviews  with 
industry (E) 

 

relevance  of 
Plato/AVB 
differentiatio
n 

economic 
relevance, 
stakeholder  perception  and 
other determining factors 

Market/sector analysis (E) 

 

Questionnaires to/interviews  with 
industry (E) 

Questionnaire  to/  interviews  with 
excise administrations (E) 

172