Taxation, customs union and anti-fraud

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Excise duties on alcohol and alcoholic beverages

Overall state of play:

Evaluation finalised Q4 2016, COM(2016)676, SWD(2016)336 and 337
Commission proposal adopted on 25.05.2018, COM(2018) 0334
Legal act: adopted; Council Directive (EU) 2020/1151 of 29 July 2020 amending Directive 92/83/EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages

State of play, main conclusions, outlook

The Commission proposed a revision of Directive 92/83/EEC to reduce administrative burdens and costs for both Member States and economic operators and reduce distortion within the internal market, as well as addressing anti-fraud objectives. The revision also considered the REFIT Platform opinion on a common interpretation of EU laws on wine and spirits.

Estimated savings and benefits

Evidence collected in the evaluation and the study showed that the lack of clarity of certain provisions (e.g. in the area of classification) can lead to legal uncertainty over the treatment of specific products, which in turn, can result in additional costs to businesses such as unnecessary administrative and compliance costs for tax administrations and economic operators.

The REFIT aspects related predominantly to identifying opportunities for simplification, reduction of inconsistencies, gaps and other ineffective measures, which can lead to unnecessary costs. Most of the opportunities are linked to the elimination of the legal uncertainty over the interpretation of certain ambiguous provisions. Unfortunately, only anecdotal evidence (and without monetised disadvantages) was available where the problems resulted in legal disputes before the CJEU.

Having no baseline, it was more difficult to estimate any potential benefits of the proposed changes. The support study concluded that the additional costs and burdens for any solution were found marginal and offset by benefits. Hence, it could be concluded that the net outcomes will be globally positive for all stakeholder negatively affected by the status quo.

REFIT Platform

In its opinion on a common interpretation of EU laws on wine and spirits, the REFIT Platform Stakeholder group recommended that the Commission reduces the room for interpretation in the Directives on wine and spirits by issuing a common threshold on fermented alcohol. The Stakeholder group further suggested that the Commission ensures harmonization in the taxation on wine and spirits in the EU and national measures (e.g. prohibition of strip stamps) to eliminate room for national interpretation. Some members of the REFIT Platform Government Group recognised that accurate definitions and greater clarity in legislation can reduce legal uncertainty. However, views were divided as to whether there was a need to simplify the structures of excise duties on alcoholic beverages and on whether there should be common thresholds on fermented alcohol. Given the revision of the "Structures Directive", most Members of the Government Group were of the opinion that the Commission should continue the ongoing data collection exercise to come up with an informed impact assessment.

This opinion was considered by the Commission as part of its preparatory work to revise the Directive.

State of Play:

Finalised COM(2016)676, SWD(2016)336 and 337, 28 October 2016

Scope:

Evaluation of Council Directive 92/83/EEC.

Evaluation findings:

The Directive has proven to be effective and generally appropriate for enabling adequate collection of excise duties for the large majority of stakeholders.

Overall, the evaluation found that the current structures generally allow for neutral conditions of competition. At the same time, the evaluation findings concluded that some distortions within the internal market require action.

The main issues relate to the lack of clarity of the classification of alcohol and alcoholic beverages in the "fermented beverage" category; the need to improve and clarify the rules supporting the exemptions applied to denatured alcohol; the possibility to extend the rules for reduced rates for small producers of all alcohol.

The evaluation also identified areas of unnecessary administrative and compliance costs for tax administrations and economic operators. These costs result from certain definitions, which can lead to legal uncertainty over the treatment of specific products.

State of Play:

Adopted on 25.05. 2018; COM(2018) 0334

Which objective(s) did the Commission pursue?

The proposal aimed at ensuring the proper functioning of the internal market and free movement of goods within the EU, protecting public health, and preventing and correcting distortions of competition. It was expected that the initiative will lead to a reduction of administrative and compliance costs, improvement in revenue collection, in some areas also to a reduction of fraud potential and facilitation of legitimate trade.

Estimated savings and benefits

The proposal focused on unnecessary regulatory costs and burdens, which could be avoided if the Directive functioned better. In particular, the proposal focused on the hassle costs from the lack of legal uncertainty over the treatment of specific products. Clarification of the exemption for indirect uses of partially denatured alcohol would ensure a fairer treatment across the EU and reduce the costs for users in the minority of Member States that currently do not consider that partially denatured alcohol used for such indirect uses qualify for this exemption.

For example, the annual administrative burden as a result of the proposed extension of the reduced rate scheme to small cider makers is estimated to be EUR 178 per cider maker or an aggregated total of EUR 200 000 annually. These burdens are similar to those incurred by small breweries availing of this scheme.

State of Play:

Adopted, Council Directive (EU) 2020/1151 on the harmonization of the structures of excise duties on alcohol and alcoholic beverages

Outcome of Legislative Procedure

During the discussions, several new optional provisions were added by the Council including:

• the extension of the reduced rate scheme to all small producers of wine, other fermented beverages and intermediate products and the possibility for self-certification by these producers;

• an exemption or reduced rates for home distillation;

• an exemption for food supplements.

Estimated savings and benefits

The Directive applies from 1 January 2022. The Commission will assess the impacts and submit its first report by 31 December 2024. This report must assess the implementation of the Directive and in particular, it should focus on the new provisions added in Council.

The administrative burden for the reduced rate scheme for all small producers should be similar to the burdens incurred by small breweries availing of the existing scheme. The option of self-certification may reduce the burden for administrations.