CELEX: 51987PC0328
Language: en
Date: 1987-08-21
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON APPROXIMATION OF THE RATES OF EXCISE DUTY ON ALCOHOLIC BEVERAGES AND ON THE ALCOHOL CONTAINED IN OTHER PRODUCTS (presented by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (87) 328
Vol. 1987/0190
 ---pagebreak--- Disclaimer
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
  REVISED VERSION                                       COM(87 ) 328 final / 2
                                                        Brussels , 21 August 1987
                        PROPOSAL FOR A COUNCIL DIRECTIVE
                ON APPROXIMATION OF THE RATES OF EXCISE DUTY ON
           ALCOHOLIC BEVERAGES AND ON THE ALCOHOL CONTAINED IN OTHER
                                          PRODUCTS
                           ( presented by the Commission )
                                                   08  09
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 ---pagebreak--- EXRLANAIQR5LMEM0RANDUM
I.       INTRODUCTION
         The overall    approach towards completing the internal
         market as far as indirect taxation is concerned is
         described in the Global Communication to the Council
         ( 1 ).    That   communication  sets   out  the reasons
         underlying the proposals which the Commission is
         making and deploys the arguments in their support .
         It is particularly important        therefore that the
         present document should be read in conjunction with
         the Global   Communication .
         This proposal is for a Directive concerning excise
         duties on alcoholic beverages and other products
         containing alcohol .
II .     GENERAL CONSIDERATIONS
1 .      The Commission 's proposals to harmonize the structure
         of excise duties on alcoholic beverages and other
         products containing alcohol ( 2 ) are already before
         the Council .    These provide that the tax on wine is
         to be determined by its volume alone , spirits are to
         be taxed according to their alcohol content and beers
         according to their original gravity .
2.        Turning to the rates of duties , there is at present
         within the Community a great diversity in the levels
         of taxation reflecting various fiscal and social
         considerations and no valid pattern for the Community
         as a whole is discernible .
3 . ; The jurisprudence . of the Court in this field under
       ; Article 95 of the EEC Treaty is helpful and can be
       : broadly' paraphrased as laying down that where a
         Member State cannot be regarded as a producer of a
         given drink it may not tax that drink in such a way
         as to protect its closest domestic competitors .
 ( 1 )   COM ( 87)320
 C2)     O.J.   N° C 43 of 29.4.72
 ---pagebreak---       On that basis ,                 the Court has ruled , inter alia , that
      Member States which do not produce particular types
      of spirits may not tax such goods more highly than
      spirits which they do produce , and that Member States
      which do not produce wine may not tax it more highly
      than beer , or more highly than fruit wine .
      At the same time , however , the numerous cases under
      Article 95 of the Treaty demonstrate that there is no
      abstract requirement to tax similar or competing
      products equally : provided that Member States do not
      so arrange their tax systems as to protect national
      products against imports , they may tax products at
      such rates as they think fit .
III .   T A X . . ft P P R.QX.IM A X I Q.M.-Q.E–SE.I.. R. I.I S^_JJ IN EL.ft.N D....B EER
      1 .        Recognizing             that     the       taxation        of      the    different
      families of alcoholic drinks                              could not be            examined  in
      isolation ,                 the        Commission              has          examined       the
      feasibility of fixing the rates of taxation for all
      alcoholic drinks by reference to a single criterion ,
      for example , alcoholic strength , volume or value .                                        It
      found that while the simple logic of a consistent
      system is attractive , the rates which result are
      invariably extremely disruptive both as regards the
      revenue               of      individual              Member         States          and   the
      distribution of the Community-wide                                  tax       burden on the
      categories of drinks concerned .
      As a result the Commission discarded this approach
      and turned next to the general approach in other
      excise fields , namely that of applying the arithmetic
      average of existing rates .                                   As indicated in the
      Global Communication ( 1 ), that approach is the most
      equitable since it gives equal weight to each Member
      State            regardless            of    its         size .          For       the   major
      categories                of        alcoholic             drinks         the        arithmetic
      averages of the rates applicable at 1 April 1987 are :
      - for spirits , 1271.14 ECU per hi of pure alcohol ;
      - for wine , 57.83 ECU per hl ;
      - for average beer 22.5 ECU per hi .
( 1 ) COM ( 87 ) 320
 ---pagebreak--- 2.    As   applied    to   spirits ,     the   arithmetic    average
gives a rate which would produce a modest increase in
Community      revenue        not      taking       into     account
elasticities of demand .            It has the advantage of
minimising revenue disruption for the three Member
States which would be obliged to reduce significantly
their current levels of taxation .             Four Member States
will be virtually unaffected by these proposals .
Those Member States which currently apply very low
rates of tax on spirits will of course be required to
raise    their     rates     considerably .          However ,    the
Commission    considers     that   this     result   is  consistent
with the general practice of the majority of Member
States in taxing spirits highly .                  The Commission
accordingly proposes a rate of 1271 ECU per hi of
pure alcohol for spirits .
3.   However , for wine , because the arithmetic average
gives equal significance to the rates of all Member
States , the very high rates applied in three Member
States ( where consumption is low and where there is
little    or    no   domestic      production ),       dramatically
inflate the Community arithmetic average rate .                   The
effect , assuming unchanged consumption , would be to
produce an increase of over 450% , or 7 billion ECU ,
in revenue from wine within the Community as a whole .
At the same time , the rate which emerges for beer -
taken here as containing 5% alcohol - would ,                      if
applied together with the wine rate , be in conflict
with the principles set out at point 11(3 ) above .
The    arithmetic        average       is     thus     clearly     an
unacceptable basis for          the    approximation      of   excise
duty on wine and beer .
4.     The Commission also considered applying the
average of existing rates for wine and beer weighted
according     to    consumption       in     the   Member     States .
However ,    because       this r approach         magnifies.     the
significance of the rates in Member States where
consumption is high and where wine is subject to
little or no taxation , the results move to the
opposite extreme .
The rates which emerge are :
- for wine 10.25 ECU per hl ;
- for average beer 20.26 ECU per hi .
Uhile these rates , by definition , produce no change
 in overall    revenue within       the Community       from   either
of the two drinks ,       they would require Member States
which    for  climatic     reasons      cannot    produce    wine  in
commercial quantities to tax it at roughly half the
rate per litre which they apply to domestic beer .
Such a proposal would not be realistic .
 ---pagebreak---       5.      In view of the failure of either system of
      averaging to produce acceptable results for beer and
      wine , the Commission has sought a solution which
      would minimise the disruptive effects outlined above .
      It finds that this requirement can be met by equal
      taxation of liquid quantities - a solution which
      recognizes the competition between the two drinks -
      at rates which would produce the current revenue
      within the          Community from the two drinks taken
      together .          The effect on the individual drinks ,
      assuming unchanged consumption , would be to decrease
      beer revenue within the Community as a whole by some
      0.9 billion ECU and to increase by a corresponding
      amount the revenue from wine .
      The   rate     which    achieves    these   results   and  forms   the
      basis of the Commission 's proposal is 17 ECU per
      hectolitre of wine and average beer , which converts
      to a charge for beer expressed per hectolitre / degree
      Plato of 1.32 ECU .
IV .  TAX APPROXIMATION OF SPARKLING WINES AND                INTERMEDIATE
        PRQP.VC. ia.
      1 .     Throughout the Community ,              sparkling wine is
      generally subject to higher taxation than still wine .
      There is great diversity in the levels of taxation ,
      which follow no particular pattern .                The application
      of    the       straightforward         arithmetic      or   weighted
      averages         for      these      products      again     produces
      unrealistic         results    and     the   Commission     therefore
      proposes for these products the rate for still wines
      increased by the average of the current differentials
      ( calculated in terms of proportion ) in Member States
      which    tax    both drinks .      The   rate which    results  is  30
      ECU per hi .
      2.     For     intermediate     products ,     the  proposal    for   a
      directive       on   the  harmonization     of  tax  structures    (1 )
      currently before the Council allows Member States an
      unmanageably wide measure of discretion in choosing
      their method of taxation .               Clearly , a tax structure
      which permits a Member State to base its taxation on
      the volume of the product alone or on both the volume
      of the product and its alcohol content is not a
      suitable basis on which to attempt to approximate
      rates      of    taxation .      A    common    tax   structure    for
      intermediate products needs to be established .
( 1 ) O.J.   N°   C   114   of 8.5.1985
 ---pagebreak---                                                                        6
    The   Commission    considers     on   balance   that   for   this
    relatively narrow band of medium strength products ,
    it is not essential to take alcoholic strength into
    account in determining the tax burden , and that
    intermediate products should be taxed by reference to
    their volume alone .      The Commission intends to submit
    a    suitable   amendment       to    the    proposal     on   the
    harmonization    of   the   tax    structure    of   intermediate
    products .
    The   current  structures    and    levels   of  Member    States'
    taxes on intermediate products differ widely .                 The
    arithmetic average        of    the     existing rates again
    produces unrealistic results .           However , the weighted
    average , the calculation which has a neutral effect
    on total revenue        within the Community , produces a
    realistic rate which - assuming an average strength
    for these products of 18% - is equivalent to some 37%
    of the proposed Community rate on spirits .             That rate
    - rounded to 85 ECU per hectolitre - also represents
    the rough equivalent of the rate which would result
    if typical intermediate products were taxed according
    to     their   constituent        fermented      and    distilled
    alcohols .
V. TAX APPROXIMATION OF PERFUMES TOILETRIES AND COSMETICS
     1 .   There are at present within the Community no
     common conditions governing the denaturing of alcohol
     for use in perfumes , toiletries and cosmetics .            There
     is considerable diversity in the systems of taxation
     applied to such products in the Member States .                The
     Commission 's proposal for the harmonization of the
     structures of excise duty on alcohol will be amended
     as soon as possible to provide common conditions for
     denaturing and to exempt denatured alcohol from
     excise duty .
      In  certain   Member     States     undenatured     alcohol    is
     currently used to produce perfumes , toiletries and
     cosmetics , and the structure proposal does not seek
      to prohibit such use .             For reasons of revenue
     protection,' however , it is necessary to apply a duty
      to such undenatured alcohol .
 ---pagebreak---                                                                              7
      The Commission considers that the application of a
      reduced rate equal to one-third of the rate for
      potable alcohol will meet that requirement .                 The rate
      proposed    for    the   alcohol        contained      in    perfume ,
      toiletries    and   cosmetics       is   therefore     424   ECU   per
      hectolitre of pure alcohol . Perfumes , cosmetics and
      the like are of course very " high value added "
      products in that they are very expensive in relation
      to the value of their ingredients .             The proposed duty
      on   these   products would represent a very small
      proportion of the retail selling price .
      2.       For    the    reasons         given     in     the    Global
      Communication ,    the   Commission proposes that there
      should be no flexibility in the level of common
      excise    duty    rates    to      be    applied     to     alcoholic
      beverages    and   to   the     alcohol     contained       in   other
      products .
VI .   PROPOSAL FOR    A DIRECTIVE
1 .  Content
For the reasons set out above the Commission proposes the
following rates of duty :
1 )  Potable alcohol             1 271    ECU per   hi  of pure alcohol
2 )  Alcohol in perfume ,
     etc .                         424    ECU  per  hi of pure alcohol
3 )  Intermediate products          85    ECU per   hi
4 )  Still  wine                    1 7   ECU  per  hi
5 )  Sparkling wine                 30    ECU per hi
6 )  Beer                             1 . 32  ECU  per  hl / degree Plato
 ---pagebreak--- 2. Effect
In the Commission ' s view , when set against the complexity
and diversity of Member States’ current treatment of
alcohol products , the rates which it proposes represent a
reasonable and even-handed solution .
It    is     to  be  expected    that ,  assuming   unchanged
consumption ,   the rates proposed    by the Commission will
produce significant increases in revenue in four Member
States ( GR , I , SP , P ) partly because they do not at
present tax wine and partly because their current systems
of sprits taxation apply very low rates to certain
popular products . More moderate increases in revenue are
to be expected in four Member States ( B , D , F , L ) . In
three Member States ( DK , IRL , U.K. ), where current rates
of   tax     on all  alcoholic   beverages   are  very  high ,
significant reductions in revenue are to be expected and
a  moderate reduction is to be expected in one Member
State   ( NL ).
 ---pagebreak--- 3 ) Detailed commentary
The following comments are called for on      the   individual
articles of the proposal for a directive .
Article 1
This Article lays down the principle that common rates of
excise duty shall apply to alcoholic beverages and the
alcohol contained in other products by 31 December 1992 .
This Article lays down the scope of the Directive and
defines its terms .     The common rates shall apply to all
alcohol products other than those specifically exempted
from    excise duties  under  the  directives cited    in this
Article .
Article 3
This Article provides for the periodic adjustment of the
common rates .   Such a provision is considered a necessity
for duties expressed in specific terms .          The Article
simply lays down that the system of adjustment shall be
established by a subsequent directive .
Article 4
This Article lays down the common rate of excise duty for
alcohol contained in alcoholic beverages other than beer ,
wine and intermediate products and the common rate for
undenatured alcohol contained in perfumes , toiletries and
cosmetics .    The rates are expressed per hectolitre of
pure alcohol .
Ar tic l e...5
This Article lays down the common rate of       excise duty ,
expressed per hectolitre of product , for         intermediate
products .
Article 6
This Article lays down the common rates of excise duty ,
expressed per      hectolitre   of  product , for wine     and
sparkling wine .
 ---pagebreak--- Article 7
This Article lays down the common rate of excise duty for
beer expressed per hectolitre and degree Plato .
Article 8
This Article lays down the deadline for compliance with
the Directive and requires Member States to inform the
Commission immediately of any changes made in national
law in the field covered by the Directive .
 ---pagebreak---                                                                               1Л
                             Proposal for a
                           Council Directive
                     on approximation of the rates
           of excise duty on alcoholic beverages and on
          the     alcohol    contained     in  other products
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European
Economic Community , and in particular Article 99 thereof ,
Having regard to the proposal from the Commission ,
Having  regard      to   the  opinion     of  the   European      Parliament
C 1 ) ,
Having regard       to the    opinion of      the Economic       and   Social
Committee   ( 2 )
Whereas  Council       Directives     .                      (3)    lay down
provisions     relating to the structures              of excise duties
applicable      respectively        to    alcohol ,     wine ,     beer   and
intermediate products ,
Whereas   for      the    purpose     of    establishing       an    internal
market without       frontiers     it  is   necessary    to  apply     common
rates of excise duty to each of these products ,
Whereas it is necessary to provide                    for   the     periodic
adjustment of those common rates ;
Whereas a reduced rate should be applied to undenatured
alcohol used in the preparation of perfumes , toiletries
and cosmetics ;
Whereas the excise duty on intermediate                  products      should
be charged by reference to their volume ;
Whereas different rates of excise duty should be applied
to still wine and sparkling wine ;
Whereas the excise duty on beer should be charged                          by
reference to the original gravity of the product ,
HAS ADOPTED THIS DIRECTIVE :
(1)
(2)
( 3)
 ---pagebreak---                                Artide 1
 Not later than 31 December 1992 Member States shall apply common
rates of excise duty on alcoholic beverages and on the
alcohol      contained   in  other      products  in  accordance    with
 this Directive.
                               A r t i c le 2
The products covered by this Directive are
- alcohol and alcoholic beverages as defined in Directive
     .     .
- intermediate products as defined in Directive
-    wine as defined   in Directive
-    beer as defined    in Directive       .
                                Article 3
The common rates of           excise duty        laid down     in this
Directive shall be adjusted periodically in accordance
with provisions to be established before 1 January 1989 in a
Directive adopted by the Council acting on a proposal from the Commission.
 1 .    The common rate of excise duty on alcohol contained
 in alcoholic beverages other than those referred to in
 Articles 5 to 7 below and on the alcohol contained in
 foodstuffs shall be 1271 ECU per hectolitre of pure
 alcohol .
 2.      A reduced rate of 424 ECU per hectolitre of pure
 alcohol shall be applied to undenatured ethyl alcohol
 contained in perfumes , toiletries and cosmetics .
 ---pagebreak---                                                                    1 3
                            Article  5
The common rate of excise duty on intermediate products
shall be 85 ECU per hectolitre of product .
The common rate of excise duty on wine shall be
- as regards still wine ,     17 ECU per hectolitre of
produc t ;
- as regards sparkling wine , 30 ECU per hectolitre of
product .
                            Article 7
The common rate of excise duty on beer shall be 1.32 ECU
per hectolitre / degree Plato of finished product at a
temperature of 15°C .
                            Article   8
Member      States   shall    bring    into  force    the   laws ,
regulations and administrative provisions necessary to
comply with this Directive not later than 31 December
1992 .     They shall forthwith inform the Commission of any
provisions of national law which they adopt in the field
governed by this Directive .
                             Article 9
This Directive     is addressed  to the Member States .
Done at Brussels ,                          For the Council
                                            The President
 ---pagebreak---                       Statement of impact on SME
Proposal for a Council Directive approximating the rates of excise duty
on alcoholic beverages and on the alcohol contained in other products .
The approximation of indirect taxes ( excises and VAT) is necessary ,
if fiscal frontiers are to be abolished . The proposal for a directive
on rates of alcohol duty is an integral part of the Commission 's programme
for completion of the internal market .
1 ) Contraintes administratives
    None
2 ) Allègements pour les entreprises
    The White Paper on completing the internal market explains that
  ' the approximation of excise rates is a necessary pre-condition for the
    elimination of fiscal frontiers ; the aim of the programme is to enable
    businesses to dispense with frontier formalities .
3 ) Inconvénients pour les entreprises
    The Commission proposes Community rates for the various groups of
    alcoholic drinks . The adoption of these rates will mean for each group
    a fall in taxation in currently high taxing countries and an increase
    in low taxing countries , with consequent results for the sectors and
    countries concerned .
4 ) Effets sur l' emploi
    Direct effects on employment should be negligible .
                                                          A
5 ) Y-a-t - i l eu concertation avec les partenaires sociaux ?
    No ,   they have not been consulted .
6 ) No easier alternative exists .