Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages : executive summary.
Date: 2018-08-24
Institutions: Directorate-General for Taxation and Customs Union
Subjects: EU Member State, alcohol, alcoholic beverage, beer, directive (EU), excise duty, fiscal policy, market, public consultation, tax exemption, tax harmonisation, wine

Study on Council Directive 
92/83/EEC on the structures 
of excise duty on alcohol and 
alcoholic beverages 

Final Report 

Executive Summary 

June 2018 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 
Directorate General for Taxation and Customs Union 
Directorate C – Indirect Taxation and Tax Administration 
Unit C.2 – Indirect Taxes other than VAT 
Contact:  
E-mail:TAXUD-UNIT-C2@ec.europa.eu 

European Commission 
B-1049 Brussels

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

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ISBN 978-92-79-85819-2 
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© European Union, 2018 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

Reproduction is authorised provided the source is acknowledged. 

Acronyms and Abbreviations 

Actual Alcoholic Strength by Volume 

Alcohol as a Flavour-Carrier 

Completely Denatured Alcohol 

Court of Justice of the European Union 

Combined Nomenclature 

Combined Nomenclature Explanatory Note(s) 

Excise Product Code 

European Union 

Hectolitre Pure Alcohol 

Million 

Impact Assessment 

Intermediate Products 

Member State(S) 

Other Fermented Beverages  

Partly Denatured Alcohol 

Small and Medium-sized Enterprise 

ABV 

AFC 

CDA 

CJEU 

CN 

CNEN 

EPC 

EU 

hlpa 

mn 

IA 

IP 

MS 

OFB 

PDA 

SME 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

EXECUTIVE SUMMARY   

1.  Introduction 

The overall purpose of this Study is to contribute to the Impact Assessment (IA) of a 
set of policy options for a possible revision of Directive 92/83/EEC on the structures of 
excise duty on alcohol and alcoholic beverages (‘the Directive’). The Study takes into 
account  the  results  of  the  evaluation  of  the  Directive  conducted  in  2016,  and  the 
following  Commission’s  Report  (2016)  and  Inception  Impact  Assessment  (2017).  The 
Study has three main objectives, namely: 

  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 previous evaluation study.  

  assess the evolution of the problems if no further action at EU level is taken 

(dynamic baseline scenario). 

  assess the economic, social and environmental impacts of the possible options 

to address the problems identified. 

The scope of the work includes six problem areas that can be summarised as follows:  

1.  Classification of alcoholic beverages: legal uncertainties in the classification 
of  certain  ‘borderline’  products  using  the  current  definition  and  criteria,  with 
possible adverse effects on market functioning, tax revenues and administrative 
burden.  Moreover,  uncertainties  with  the  interpretation  of  the  notion  ‘entirely 
fermented  origin’,  and  minor  issues  with  the  structure  of  the  Excise  Product 
Codes (EPC).     

2.  Exemptions  for  denatured  alcohol:  possible  ineffective  functioning  of  the 
single  market  and  associated  costs,  as  well  as  risk  of  fraud  under  the  current 
rules for 'completely' and ‘partially’ denatured alcohol and impact thereof.   
3.  Reduced rates for small producers: issues with the functioning of the scheme 
for small producers and possible extension to alcoholic beverages for which this 
option is currently not available. 

4.  Reduced rates for low-strength alcohol: unclear objective of this provision 

and possible need to revise the current thresholds. 

5.  Exemptions  for  private  production:  possible  impacts  of  an  extension  of 
exemptions to beverages not currently covered (intermediate products and ethyl 
alcohol). 

6.  Measurement of Plato degree of sweetened  / flavoured  beer:  review of 
the different interpretation and calculation methods across national authorities 
and industry stakeholders and the possible impact on market and tax revenue. 

2.  Overview of methodology 

An in-depth  consultation  of  stakeholders  has  been  carried  out,  covering  a  total  of  12 
Member  States  (MS),  as  well  as  EU-level  institutions  and  organisations.  Overall,  161 
interviews  were  conducted  involving:  public  authorities  and  administrations  (tax  and 
customs  authorities,  public  health  authorities,  agriculture  authorities  and  others); 
economic operators, of different sizes, active in different segments of the market and 
value-chain;  non-government  public  health  organisations;  and  various  other  alcohol 
market  experts.  The  interview  programme  was  complemented  by  an  Open  Public 
Consultation, which received a total of 166 responses. 

The  Study  results  are  also  based  on  the  outcomes  of  a  quantitative  market  analysis 
conducted  with  the  support  of  econometric  models  and  involving  the  review  of  more 
than 800 potentially problematic products, as well as on a comprehensive desk review 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

of  EU  and  MS-level  policy  documents,  scientific  literature,  various  institutional 
databases, industry and stakeholders’ reports, web-sources and other ‘grey’ literature. 

The  main  focus  of  the  analytical  work  was  to  compare  the  ‘no  change’  scenario  with 
several ‘policy change’ scenarios, using both quantitative and qualitative methods. Four 
main  categories  of  impact  have  been  assessed  to  this  end:  (i)  tax  revenues;  (ii) 
administrative, enforcement, and other regulatory 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 policies).    

3.  Summary of key findings  

3.1 

Classification of alcoholic beverages 

The Directive defines the categories of alcoholic products subject to harmonised excise 
duty  in  accordance  with  their  customs  classification, i.e.  the  Combined  Nomenclature 
(CN)  codes.  The  correspondence  between  the  fiscal  categories  and  the  CN  codes  is 
however not straightforward, and certain novel products may take advantage in certain 
circumstances  of  an  unduly  favourable  tax  treatment.  It  has  been  observed  that 
classification uncertainties may 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.  

‘Borderline’ products can be found primarily in the tax categories of Other Fermented 
Beverages (OFB) – especially low-strength mixed drinks and certain types of cider – and 
among  Intermediate  Products  (IP)  –  i.e.  products  with  a  fermented  base  that  are  in 
many  respect  equivalent  to  certain  spirits-based  beverages.  In  absolute  terms,  the 
magnitude  of  the  problem  is  modest  and  mostly  stable:  ‘borderline’  products 
currently amount to an estimated 308 million litres/year, i.e. less than 0.6% of the total 
market of alcoholic beverages in the EU. Nonetheless, for the tax categories concerned 
the issue is more substantial: nearly 17% of OFB and 24% of IP may consist of products, 
to  different  extents,  exploiting  an  unduly  advantageous  tax  treatment.  Uncertainties 
with ‘borderline’ products may increase the classification burden for administrations 
and economic operators, which has been estimated around one million EUR per year.         

Three main policy options have been considered and assessed:  

(i)  Revising  the  current  definition  of  OFB  and  IP,  and  establishing  common 
criteria (and implementation methods) to identify products that have lost their 
fermented character and should be therefore assimilated to ethyl alcohol (in line 
with the landmark rulings of the Court of Justice - CJEU).  

(ii) Splitting  the  OFB  category  into  two  sub-categories,  of  which  one  would 
maintain  the  current  treatment  while  the  other  –  ideally  comprising  all 
‘borderline’ products – would be defined and treated separately.  

(iii) The third option encompasses binding and non-binding measures that require 
no change of the Directive, and in this sense are mostly outside the remit of 
the  regulatory  revision  process.  These  measures  are  not  strictly  alternative  to 
the other two options above, but rather complementary and include: clarifying 
certain subjective criteria laid down in the CN and the related Explanatory Notes 
(CNEN);  adopting  non-binding  classification  guidelines;  promoting  a  sectoral 
regulation for cider; and measures to enhance market monitoring and control.       

All  options  may  help  reduce  the  classification  uncertainties,  but  also  present 
downsides.  Option  I  would  be  effective  in  reducing  the  disparities  of  treatment  of 
similar  products  in  one  country  (also  cutting  the  administrative  burden),  but  not  so 
effective  against  the  risk  that  the  same  product  is  treated  differently  in  different 
countries, and may cause troubles in external trade. Option II would enhance EU-wide 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

harmonisation,  reducing  the  need  for  special  national  taxes  for  specific  categories  of 
products  (like  ‘alcopops’,  ‘pre-mixes’  etc.),  but  would  not  effectively  address 
inconsistencies generated at CN level, and would impose additional burden to economic 
operators and tax authorities. As regards Option III, the revision of CN / CNEN and the 
adoption  of  detailed  classification  guidelines  may  pre-empt  the  need  to  modify  the 
Directive, while the adoption of sectoral regulation for cider would facilitate a coherent 
enforcement of classification rules. The major difficulty with these measures is that they 
fall  outside  the  current  regulatory  process,  so  they  require  the  involvement  and 
consensus of several different services of the national and European administrations.      

Under both regulatory  options, the  market impact for the target products would 
be significant, since their demand is quite sensitive to price. According to the results 
of  the  economic  model  used,  a  substantial  decline  of  sales  of  ca.  80-200  million 
litres/year can be predicted. This is a small amount if compared to the overall alcoholic 
beverage markets (less than 0.4%), but substantial for the specific lines of products at 
stake. Regarding excise duty revenues, the decline in sales would not be entirely offset 
by the higher rates applied, so a net loss in tax revenue can be expected (down a 
maximum of EUR 247 million) - very likely mitigated by consumer switching to other 
products.   

Both  policy  options  may  unintendedly  affect  certain  non-target  products, 
especially  aromatised  wine-based  drinks  and  cocktails  that  are  currently  classified  as 
‘other fermented beverages’. The estimated market and fiscal impact for these products 
would be of the same scale of magnitude of target products (i.e. down approximately 
78 million litres/year), which may pose questions on the balance of such intervention. 

Table 1 – Summary of the expected impact of proposed options on sales volume and tax 
revenues  

No Change 

Option I 

Option II 

Volume 
(mn litres) 

Tax revenue 
(€ mn) 

Volume 
(mn litres) 

Tax revenue 
(€ mn) 

Volume 
(mn litres) 

Tax revenue 
(€ mn) 

308.5 

795.0 

-42.3 

-122.5 

-133.3 

-275.4 

104.5 

TOTAL 

413.0 

11.5 

806.5 

-35.8 

-78.1 

-3.4 

-74.5 

+28.7 

-125.9 

-207.8 

-246.7 

‘Borderline’ 
products 
Non-target 
products 

Another issue at stake regards the addition of minimal amounts of alcohol as a flavour 
carrier (AFC) or for other functional purposes to certain flavoured wine and OFB. This 
practice seems in contrast with the ‘entirely fermented origin’ requirement laid 
down  in  the  Directive’s  definition  for  these  products.  The  evidence  from  fieldwork 
revealed  that  various  MS  have  already  adopted  legal  and  administrative  provisions 
establishing a margin of tolerance for products containing AFC, and would be in favour 
of  harmonised  rules  in  this  regard.  The  Study  findings  show  that  the  adoption  of 
similar  approaches  at  EU  level  would  reduce  the  existing  uncertainties  and  possibly 
improve the market functioning, while the impact on tax revenues would be minimal.      

Finally, the lack of a separate EPC for Other Fermented Beverages is not ideal for 
monitoring purposes and may fuel misclassifications and errors in excise duty payment, 
although the magnitude of concrete problems is minimal since most MS apply the same 
excise duty to wine and OFB. The introduction of a separate EPC for OFB would cause 
some  initial  (modest)  administrative  burden,  which  would  be  counterbalanced  by 
improved clarity, reduced risks of errors and better market monitoring.    

3.2 

Exemptions for denatured alcohol  

Article 27 of Directive 92/83/EEC stipulates that alcohol shall be exempted from excise 
duty  if  it  has  been  denatured  (i.e.  had  certain  substances  added  to  make  it  unfit  for 
human consumption). It distinguishes between  ‘completely’ denatured alcohol (CDA), 
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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

for which there is a system of mutual recognition of national denaturing procedures 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 for human consumption, and MS are free to define their own national 
procedures.  Approximately  EUR  3-3.5  billion  worth  of  denatured  alcohol  is  consumed 
annually in the EU for a variety of industrial uses, including the manufacture of cosmetics 
products, screenwash and anti-freeze, detergents, inks, paints and coatings, as well as 
biofuels, which account for the largest proportion by far. We estimate 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.   

Overall,  the  data  collected  and  analysed  as  part  of  this  Study  suggests  that  the  EU 
regulatory  framework  for  exempting  denatured  alcohol  from  excise  duty  works 
relatively  well.  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. 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. It is evident (inter alia from the frequent 
discussions  within  the  Committee  on  Excise  Duty  and  the  Indirect  Tax  Expert  Group 
dating back to 2008) that the provisions in Article 27 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  to  be  moved  across 
borders between MS whose interpretation of the applicable rules do not coincide. 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. However, the 
evidence  suggests  that  only  a  limited  number  of  economic  operators  in  specific 
circumstances  have  been  affected.  There  are  also  concerns  about  fiscal  fraud  with 
denatured alcohol, which 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 certain Central 
/ Eastern European MS). 

Regarding the mutual recognition of ‘completely’ denatured alcohol (CDA) produced 
in different MS, the unclear wording of the Directive has in the past led to a number of 
problems, primarily when economic operators  wanted to produce or use CDA using a 
formulation notified by a MS other than their own. There have also been cases of fraud 
involving  certain  national  CDA  formulations.  However,  with  the  recent  adoption  of  a 
common  Eurodenaturant  by  a  large  majority  of  MS,  the  likelihood  of  these  kinds  of 
problems  occurring  in  the  future  (and  therefore  the  negative  impacts)  is  greatly 
reduced. Nonetheless, since not all MS are able to agree on a single CDA formulation, a 
clarification of the wording of Article 27.1 (a) would be beneficial to eliminate the 
remaining ambiguity, and thereby avoid potential future disputes.  

The non-harmonised approach to ‘partially’ denatured alcohol (PDA) is welcomed 
by most  stakeholders,  as it allows MS to balance the needs of their national industry 
with  the  need  to  minimise  the  fraud  risks  in  the  way  they  deem  most  appropriate. 
However,  the  proliferation  of  national  procedures  and  formulations  can  create 
uncertainties, risks and/or costs when more than one jurisdiction is involved – though 
larger firms are typically able to overcome these, while smaller ones tend to have few 
economic  incentives  to  source  denatured  alcohol  from  abroad.  There  are  also  known 
cases of fraud involving products which have been manufactured with alcohol that has 
been  denatured  with  a  ‘weak’  formulation  (e.g.  because  the  smelling  and/or  tasting 
agents are relatively easy to remove / mask, and the absence of a chemical analytical 
marker makes it difficult for the competent authorities to detect the alcohol is illicit). 

In theory, a complete harmonisation of PDA formulations for different sectors could 
further  facilitate  cross-border  trade  in  PDA  and  alleviate  the  fraud-related  concerns. 
However,  this  would  require  MS  to  agree  on  compromise  solutions  to  reconcile  their 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

(sometimes  very  restrictive,  sometimes  very  flexible)  views  on  the  formulations  they 
are prepared to authorise. Recent attempts to achieve such a compromise for certain 
sectors failed, and many MS seem not willing to accept full harmonisation, due to the 
potentially large cost implications for (certain sectors of) their national industries. 

Partial harmonisation seems therefore more effective. It would involve agreement 
on a harmonised list of PDA formulations that is applicable across the EU, while allowing 
MS  that  wish  to  do  so  to  authorise  different  formulations  for  specific  uses  where  the 
fiscal risk is demonstrably low. This would enhance legal certainty and transparency to 
a  significant  extent,  and  thereby  facilitate  cross-border  operations  as  well  as  further 
restrict practices that might give rise to fraud, without requiring the minority of MS who 
currently  authorise  specific,  tailored  PDA  formulations  for  individual  users  to 
categorically  stop  doing  so.  This  option  may  require  further  preparatory  work  on  the 
harmonised list and the definition of the concept of low fiscal risk, before these could be 
enshrined in the Directive itself. ‘Softer’ policy options, such as a database of national 
formulations,  and/or  EU-funded  measures  to  enhance  confidence  and  trust  between 
competent national authorities, could also be considered, although the benefits these 
would generate are likely to be more limited. 

The text of Article 27.1 (b) should be amended  so as to clarify the wording and 
address two issues that continue to cause uncertainties and discrepancies, namely: 

  Clarify that the term ‘used for the manufacture of’ includes indirect uses (such 
as cleaning manufacturing equipment and production lines). This would ensure 
a fairer treatment across the EU and reduce the costs for users in the minority 
of MS that currently do not consider that PDA used for these purposes qualifies 
for the exemption. 

  Clarify what can be considered a  ‘finished product’ containing PDA that can be 
exempted from excise duty and released for consumption. This would enhance 
legal  certainty  and  help  reduce  the  risk  of  fraud  by  limiting  the  scope  for  the 
misclassification  of  PDA  mixed  with  very  small  quantities  of  other  substances 
(which should still be subject to controls under the duty suspension regime). 

3.3 

Reduced rates for small producers  

Member States have the option of granting reduced excise duty rates to small producers 
of beer and ethyl alcohol, in order (i) to support the  competiveness  of SME vs. large 
players, in the case of  beer, and  (ii) to protect traditional productions, in the case of 
ethyl alcohol. Reduced rates cannot be granted to small producers of wine,  OFB, and 
intermediate products. This may affect conditions for competition, and prevents MS from 
pursuing the same policy objectives in the markets for the excluded categories. 

In the 23 MS that have adopted reduced rates for small breweries, the scheme is 
estimated to cover 95% of active breweries, and 5% of the production (about 17 million 
hectolitres),  and  causes  very  modest  foregone  tax  revenues  (ca.  1%  of  the  revenue 
from  beer)  and  negligible  administrative  costs  for  operators.  Two  minor  areas  of 
improvement  have  been  identified,  which  could  be  tackled  by  means  of  a  legislative 
revision or non-binding guidelines: 

  Improving  the  clarity  of  the  definition  of  ‘independent  brewer’  and  the 
conditions for recognising such brewers. In this area, non-binding measures (e.g. 
guidelines) seem more flexible and easier to update.  

  More  straightforward  application  to  cross-border  operators,  e.g.  by 
establishing  a  mandatory  uniform  certificate  for  operators,  or  by  means  of  an 
appropriate system for  exchanging data among national authorities (the latter 
not requiring a legislative revision). 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

These measures may generate benefits in terms of legal certainty, competitiveness of 
SME, and cross-border trade, although on a limited scale given the small share of the 
market  concerned.  The  implementation  burden  would  also  be  modest,  although 
concentrated on the customs authorities of the MS  where reduced rates are currently 
not  in  place.  Enforcement  difficulties  should  be  carefully  considered  when  choosing 
among the different options. 

As far as small distilleries are concerned, reduced rates are implemented in only seven 
MS and cover a very small number of operators. In particular, the very low threshold of 
10  hlpa  per  year  established  in  the  Directive  in  practice  restricts  this  facility  to 
ancillary  spirit  production,  which  represent  a  negligible  share  of  the  market. 
Therefore, the option of raising this threshold moderately (to 100 hlpa) or significantly 
(10,000 hlpa) has been assessed in the Study. Under the first scenario the impact would 
be limited, since only very small commercial operators would gain access to the facility, 
whereas  under  the  second  scenario  mid-size  commercial  operators  would  also  be 
covered. So, the competitiveness of SME in the spirits market would be largely enhanced 
under  the  latter  scenario,  but  this  may  also  generate  market  distortions,  substantial 
reductions of the excise duty revenues collected, negative public health effects, and the 
need to scale up monitoring and enforcement efforts.   

Finally,  the  Study  examined  the  possibility  of  introducing  this  option  for  the 
categories of products not currently covered, namely wine, OFB and intermediate 
products.  The  magnitude  of  the  problem  and  the  expected  impacts  would  not  be 
uniform:   

  For still wine, the scope of application would be limited, as 78% of the market is 
currently subject to  zero  rate. Moreover,  small producers  may already receive 
support to improve their competitiveness in the form of exemptions from several 
requirements of the excise legislation. Conversely, stakeholders perceive the risk 
that  this  option  may  eventually  translate  into  the  introduction  of  positive 
minimum rates at EU level.  

  The competitive position of small cider makers vis-à-vis large producers is similar 
to that of small breweries, so the introduction of reduced rates for this category 
may have beneficial effects on their development with limited adverse effect in 
terms  of  foregone  revenues  and  administrative  burdens.  The  lack  of  a 
harmonised  sectoral  legislation  on  cider  may  represent  an  obstacle  to  an 
equitable implementation of the scheme.    

  Finally, extending reduced rates to small producers of fortified wine would trigger 
impacts which are, on the one hand, limited, and, on the other, uneven across 
operators  active  in  the  same  value  chain.  Moreover,  it  would  be  somehow 
redundant with the reduced rates extended under Art 18.4 of the Directive. 
  Reduced  rates  may  incite  consumption,  with  negative  public  health  effects 
especially in MS where these products are popular and standard rates are high. 

Table  2  –  Reduced  rates  for  still  wine  and  cider  makers:  Problem  dimension  and 
expected impacts 

Small producers 

%     

Impacts of the extension 

Threshold 
considered 

% of 
companies 

Market 
share 

Still wine 
Cider 

1,000 hl 
15,000 hl 

85% 
97% 

17% 
5% 

EU market 
at zero 
rate 
78% 
9% 

Foregone 
revenues 

Administrative 
burden 

€300 mn 
€15 mn 

1.2 €/hl 
0.3 €/hl 

3.4 

Reduced rate for low-strength alcohol 

Articles 5, 9, 13, 18, and 22 of the Directive allow MS to apply reduced rates on low-
strength  alcoholic  beverages.  The  level  of  uptake  of  this  option  across  MS  is 
uneven, primarily due to the specificities of national fiscal priorities and targets rather 

10 

 
 
 
 
 
 
 
 
 
 
Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

than to lack of clarity on its objective in the text of the Directive. Furthermore, there is 
scant evidence on its potential contribution to public health objective (i.e. in the form of 
a reduction of the overall per capita consumption of alcohol). In fact, tax reductions 
for low-alcohol beverages may affect consumers’ behaviour in opposite ways: 
on the one hand reducing the amount of pure alcohol consumed by regular consumers, 
on the other hand potentially encouraging the initiation of abstainers (including young 
persons) to the consumption of alcoholic beverages.  

For each product category, the Directive establishes the thresholds under which MS may 
apply  reduced  rates.  From  a  market  perspective,  these  thresholds  are  of  limited 
relevance (with the exception of OFB), since only a small share of existing products 
are  eligible.  Therefore,  the  Study  investigates  the  possibility  of  raising  the  existing 
thresholds to encourage MS uptake and, by consequence, more pervasive effects.  

In the case of beer, there is some consensus among stakeholders – with a few notable 
exceptions  -on  the  benefit  of  raising  the  current  threshold  to  3.5%  vol.  This 
amendment  would  expand  the  scope  of  application,  and  eventually  encourage  the 
development of this segment of the market. In fact, lower taxation may result in lower 
retail prices (depending on the extent to which the discount is passed on to consumers) 
and encourage price-sensitive consumers to shift from stronger products. The proposed 
option  may  lead  to  foregone  tax  revenues  of  about  1%  of  the  current  level.  The 
price reduction may generate a small increase in per capita consumption of low-alcohol 
beer (between +2 cl and +10 cl per year based on a sample of MS). 

As  regards  the  other  alcoholic  beverages,  there  is  limited  appetite  for  revising  the 
current  thresholds,  and  no  alternative  thresholds  have  been  proposed.  Furthermore, 
higher thresholds for intermediate products and ethyl alcohol may eventually turn out 
advantageous for certain new products like mixed drinks that are particularly appealing 
to young people, thus resulting in negative impacts for public health policies.   

3.5 

Exemption for private production  

MS  can  exempt  from  the  payment  of  excise  duties  the  production  of  ‘fermented 
beverages’ (i.e. beer, wine and other fermented beverages) for own consumption. With 
very limited exceptions, this activity is unregulated. On the contrary, such an exemption 
is rarely granted to the production of spirits and fortified products, as private distillation 
is  considered  more  dangerous  from  a  public  health  perspective.  The  exclusion  of 
intermediate  products  and  ethyl  alcohol  may  constitute  a  case  of  unequal 
treatment,  which  may  need  to  be  redressed,  if  no  significant  negative  effects  are 
triggered. 

The  amount  of  illicit  private  distillation  is  estimated  to  be  low  in  most  of  the 
countries  reviewed  (between  0.5%  and  2.5%  of  the  current  market  for  spirits),  and 
more  significant  in  a  couple  of  them  (respectively  3.5%  and  6%).  At  EU  level,  it  is 
estimated to represent about 2.3% of the spirits market. Foregone excise revenues in 
the six sample MS examined amount to about EUR 100 million (1.4% of the revenues 
from  ethyl  alcohol);  at  EU  level,  tax  losses  can  be  estimated  at  about  EUR  250 
million (1.6% of the revenues from ethyl alcohol).  

The option to introduce an exemption for private production of intermediate products 
and ethyl alcohol would have modest but negative impacts in terms of tax revenues 
(EUR -45 million, or -0.3% of the excise revenues from ethyl alcohol at EU level), and 
market  effects  (-0.1%  of  the  current  production  of  spirits).  Additionally,  it  could  be 
harmful from a public health perspective since it may increase: (i) the risks of methanol 
intoxication;  (ii)  the  accessibility  and  consumption  of  distilled  products.  The  option  is 
also likely to generate some additional administrative burdens and enforcement costs 

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Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

for public authorities.  In any case, MS that would not take up this option  would bear 
minimal negative spill overs, as cross-border effects are estimated to be negligible. 

3.6  Measurement of Plato degree of sweetened / flavoured beer 

Article 3(1) of the Directive allows for levying excise duty on beer with reference either 
to the Plato degree or ABV strength of ‘finished product’. This article results in 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. In particular, there 
seems to be three different approaches (A, B1 and B2) to measuring the Plato strength 
of sweetened/flavoured beer:  

  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 final 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 final 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. 

Different approaches lead to different values of the Plato degree. In particular Approach 
A and B1 generally result in a lower Plato degree than Approach B2. Such difference has 
evidently  an  impact  on  the  applicable  excise  duty.  Assuming  the  excise  duty  is 
consistently  passed-on  to  retail  price,  it  may  also  affect  the  competitiveness  of 
products and the related demand and ultimately cause disparities of treatment and 
potential distortion of the market. The different methods are also the basis of a legal 
dispute that has been brought before the CJEU, whose judgment is still pending.   

Table  3  -  Examples  of  possible  results  of  measuring  the  Plato  degree  with  different 
approaches 

Approach A (base beer) 
Approach B1 (non-fermented 
extract) 
Approach B2 (present extract) 

Radler (50% made 
of lemonade) 
5.5°  

Other sweetened/flavoured beer 
(Additive added after fermentation) 
12.0° 

5.6° 

10.0° 

11.7° 

14.6° 

To address the problems  caused by diverging interpretations two policy  options have 
been  considered:  (i)  a  review  of  Article  3(1)  to  clarify  what  is  meant  by  ‘finished 
product’;  and  (ii)  the  issuance  of  guidelines  to  harmonise  the  calculation  methods. 
Overall, the option consisting  in reviewing  Article  3(1)  seems more effective, 
since non-binding measures cannot ensure compliance from all MS and would therefore 
not  eliminate  the  risk  of  legal  disputes,  and  related  costs  for  both  authorities  and 
brewers. Since the CJEU case is still ongoing, the Study does not recommend any of the 
possible interpretations, but focuses on assessing the impact  from the three different 
scenarios. In particular:  

  Approach B2, would result in only minor changes since it is already the choice of 
several MS.  The change in the  overall market volume  would be negligible and 
the tax revenue from beer would increase by +0.2%.  

  Approaches A and B1 would have a similar market impact: sales may decrease 

by -1% and tax revenue may increase by 0.1%.   

  Furthermore,  Approaches  A  and  B1  would  generate  higher  enforcement  costs 
than  approach  B2,  as  customs  laboratories  cannot  measure  the  tax  base  by 
checking  the  Plato  degree  of  the  end-product;  rather,  they  would  need  to 
perform checks at the production facilities. 

12 

 
 
  
 
 
 
 
 
 
 
 
 
Study on Council Directive 92/83/EEC on the structures of excise duty on alcohol and alcoholic beverages 

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