Call for increased duty on tobacco, alcohol and fuel

Date: 01/08/1996

MEPs will be asked early next month to support an increase in the duty charged on cigarette and tobacco sales in the Union.

They will be urged to accompany this with approval for a substantial rise in the minimum excise rates for motor fuels such as petrol and diesel as part of efforts to meet wider transport, energy and environmental objectives.

The initiatives are contained in a comprehensive report on the EU's existing taxation systems for cigarettes, alcohol and mineral fuels.

The strategy, which has already been unanimously approved by the European Parliament's economic and monetary affairs committee, will be scrutinised by the full Parliament at its next plenary session opening in Brussels on 4 September.

The report's author, German Christian Democrat MEP Karl von Wogau, maintains that changes in tobacco tax are necessary not just on health grounds, but also to eliminate distortions of competition in the internal market.

Differential rates of duty, he argues, have led to a big increase in cross-border and distance shopping.

Similarly, as the Commission reviews the impact of the EU's excise legislation agreed in 1992, the parliamentary report suggests that the only way to curb the sharp increase in cross-border alcohol sales since the advent of the single market is “by narrowing the differences of their respective duty rates”.

At the moment, the duty on spirits in Sweden, Finland, Denmark, Ireland and the UK is five times higher than the lowest levels applied in the Union. Seven countries apply a zero rate of excise duty on wine and there is a

15-fold difference between the highest rate of tax on beer (in Finland) and the lowest (in Spain).

The Parliament is expected to recommend that no change be made to the rules allowing member states to apply a zero tax rate to wine, and to suggest that new drinks - such as alcoholic lemonade and ready-made cocktails - should be subject to excise duty.

Von Wogau is also floating the idea of lower rates being applied to drinks produced by small distilleries and breweries.

The Parliament's economic affairs committee believes that changes are also overdue to the Union's taxation system for mineral oils.

Given widespread support among MEPs for the 'polluter pays' principle and the difficulty of securing agreement on a CO2 tax, it is pressing for “tax differentials ... to be graduated upwards from the minimum”.

Despite the growing pressure for changes in excise duties, MEPs are also advising the European Commission and member state governments to take employment considerations into account.

They point out that some 682,000 people are employed directly in the drinks industry, with a further 2,180,000 active in related industries such as distribution and retailing.

“Employment within the alcohol sector is in decline... Any large-scale increase in excise duty would severely exacerbate this problem,” warns the report.