Under current rules, excise duty on alcohol and tobacco bought in one EU country by a private individual for their own use and transported to another EU country is only paid in the country where the goods were bought.
But the EU is now considering revising the legislation so that consumers can no longer take advantage of low tax rates abroad to purchase alcohol and tobacco for consumption back in Ireland, for example.
In an EC Impact Assessment it is pointed out that, “Article 32(1) of the Directive provides that excise goods, acquired by a private individual for his own use and transported from one Member State to another by him in person, shall be liable to excise duty only in the Member State in which the excise goods are acquired and not in the Member State where the goods are consumed. This is an exception from the general rule that excise duties are levied in the place of consumption”.
Under revised EU rules this would no longer be the case if they bring these goods into another Member State. The “misuse” of cross-border shopping rules for private individuals purchasing alcohol and tobacco more cheaply abroad is a source of concern for several EU countries due to lost revenues and the negative impact on the effectiveness of national public health policies.
As a result, the current EU rules of cross-border shopping of alcohol beverages and tobacco products by private individuals are being reviewed to ensure that they remain fit for purpose to balance the objectives of public revenues and health protection. It’s quite possible that this will result in Irish holidaymakers having to pay Irish duty and VAT rates on alcohol and tobacco purchased elsewhere in the EU.
According to the EC’s Inception Impact Assessment, the EU’s lack of rate (and price) convergence between different countries creates a strong economic incentive to shop in Member States with lower tax rates.
“Citizens living in higher taxing Member States tend to engage in the highest volume of cross-border shopping for these products as the price differences create an incentive for consumers to make purchases in other Member States,” it explains, “Excise revenues are diverted from the Member State responsible for providing public health services to the consumer of these products to the Member State of purchase.”
At EU level, this is estimated to be in the region of €3.3 billion for alcohol and between €2.5 billion and €3.5 billion for tobacco products.
The Public Consultation aims to ensure that all relevant stakeholders have an opportunity to express their views on the current rules and how these might work in the future. It includes questions on the effects of the current system along with possible changes.
Ireland remains the second most expensive country for purchasing alcohol in the EU27, with wine prices being the highest in the EU, spirits prices being the second-highest (excepting Sweden) and beer prices the third-highest (following Finland and Denmark).
The EU statement continues, “This public consultation is targeting all stakeholders: citizens, businesses, representative organisations and public authorities of the Member States (Ministries of Finance, Tax and Health authorities), academics, researchers and non-governmental organisations. Given the nature of the initiative (purchases by private individuals for their own use) and its potential impact on cross-border trade, some questions are specifically addressed to citizens”.
The Public Consultation remains open until midnight on the 23rd of April 2021 and any changes produced as a result are expected to kick-in at the end of 2022.