As a result, small and artisan beer and cider producers (including, for the first time, small independent cider makers) are to have access to a new EU-wide certification system confirming their access to lower rates of duty across the Union.
There will also be an increase in the threshold for lower strength beer to which reduced rates may apply. Consumer health will also benefit from a crack-down on the illegal use of tax-free denatured alcohol to make counterfeit drinks.
“The EU’s common rules on the structures of excise duties on alcohol and alcoholic beverages are over 25 years old and in urgent need of an update so that they can keep pace with the challenges and opportunities offered by new technology and trade developments, while protecting public health,” commented Pierre Moscovici, the EU’s Commissioner for Economic and Financial Affairs, Taxation and Customs.
This proposal will:
- Increase the threshold for lower strength beer that can benefit from reduced rates from 2.8% volume to 3.5% volume,to provide an incentive for brewers to be innovative and create in new products. This should encourage consumers to choose low-strength alcoholic drinks over standard ones, reducing alcohol intake
- Put in place a uniform certification system, recognisable in all EU countries, confirming the status of independent small producers throughout the Union. This will reduce the administrative and compliance costs for small producers who should benefit from reduced excise rates under certain conditions
- Ensure a precise and consistent classification of cider across the EU,the current absence of which is a major obstacle for small cider producers who don’t have access to the reduced rates afforded to small beer and spirit producers
- Clarify the correct manufacturing processes and conditionsfor denatured alcohol in the EU. Such alcohol is used in the production of goods such as cleaning products, screen wash, perfume and anti-freeze and is exempt from excise duty. This exemption can be exploited by unscrupulous producers who use denatured alcohol to make and sell potentially dangerous counterfeit drinks without paying tax and even more importantly, endangering consumer health. This proposal will establish a modern system for reporting the misuse of certain alcohol formulations so that they will no longer be usable as denaturants
- Update IT systems:the new rules will replace the outdated paper-based procedures used to track movement of certain denatured alcohols and will result in the mandatory use of the Excise Movement and Control System to make it easier to follow movements of these high-risk products in real time, reducing the fraudulent use of this exemption and protecting consumers.
The proposals also include measures in general excise duty rules to remove barriers for SMEs. This will allow SMEs to use modern IT systems when they wish to do so and lifts their existing obligation to employ tax representatives. Member States can currently insist that distance sellers of excise goods employ tax representatives, which can make legitimate trade financially unviable.
EU Member States are free to set national excise rates as they see fit, provided they respect EU-wide minimum thresholds.
Existing EU rules on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages were agreed in 1992 (Directive 92/83/EEC). They set out common definitions of alcoholic products that are subject to the duty and ensure that all Member States treat the same products in the same way. They also specify the method to calculate duty on alcoholic products and the criteria for products to benefit from reduced rates or exemptions. Other legislation in this area and proposed for recast here (Directive 2008/118/EC) lays down the common provisions which apply to all products subject to excise duties (alcohol, tobacco and energy).
The revision forms part of the Commission’s REFIT programme. The Council has also asked the Commission to carry out the necessary studies and consultations to submit a proposal for the revision of both Directives. As part of this work, open public consultations were launched in 2017.
The legislative proposals will now be submitted to the European Parliament and the European Economic and Social Committee for consultation and to the Council for adoption.
However, the Council of Ministers will need to unanimously back the revised directive for it to come into effect and while the proposals have been welcomed by beer and cider producers, the European Commission’s proposals have not been looked on favourably by spirits producers.
Under the changes proposed to Excise Structures Directive 92/83, EU member states would be permitted to allow independent cider makers to charge up to 50% reduced national excise duty rates, where they produce less than 15,000 hectolitres per year.
In response spiritsEurope has argued that the proposals fail to address unfair distortion between alcoholic beverages in the EU and that they risk increasing tax discrimination further by proposing additional tax benefits for beer and cider “which already enjoy much lower tax rates than spirits”.
Ulrich Adam, Director General of spiritsEurope, said, “The proposals would mean that sectors which already enjoy massive tax benefits when compared to spirits would be handed out additional advantages. In light of the existing discrimination, such an approach would not only be extremely unfair, but would be a step in the wrong direction”.
Tax discrimination in the EU is” already excessive” with spirits making up only 25% of the EU’s alcohol beverage market but contributing 45% of the tax collected where beer makes up 42% by share but contributes only 32% of tax revenues.
“Instead of widening the tax preferences, as the proposal would, we need direct action to reduce the current levels of distortion and discrimination and to work towards a level playing field that would allow alcoholic beverages to compete more freely and fairly in the marketplace,” he added.