Article: Council adopts new minimum EU excise duty rates for alcoholic drinks

The Council has confirmed last month's agreement to update EU rules for excise duties on alcoholic drinks with special provisions for small, especially micro, breweries and incentives to produce lower alcohol products.

The new directive, finally adopted July 30 after a written procedure, brings in an EU-wide certification system for small and artisan drinks producers to ensure access to lower excise duty rates across Europe.

The directive, which will apply from January 1, 2022, also increases the threshold at which reduced rates apply to lower strength beer to 3.5% alcohol by volume (ABV) to encourage brewers to produce low alcohol products.

"The alcoholic strength of beer to which reduced rates for low-strength beer may be applied is in general too low to provide any tangible incentive for brewers to be innovative and create new low-strength products," says a recital to the text circulated.

In another change, the directive will require all ingredients in beer, including those added after the completion of fermentation, to be taken into account when measuring the degree Plato, used to quantify the concentration of extract as a percentage by weight.

However, member states that currently do not take ingredients added after fermentation into account can continue to measure the degree Plato in this way until December 31, 2030.

Avoiding discrimination

The text agreed by written procedure also appears to respond to criticism by spiritsEUROPE that the new directive discriminated between different alcoholic drink categories by allowing beer and cider a more favourable excise duty regime than spirits.

"In order to avoid other alcoholic beverages being treated differently from beer and ethyl alcohol, Member States should also have the power to apply reduced rates to other alcoholic beverages produced in small volumes by independent small producers," it states.

The text agreed further allows member states "to limit the application of reduced rates to intermediate products and other fermented beverages, taking into account various criteria, such as the alcoholic strength of the finished product or the quantity and type of raw materials used to produce it."

In a statement welcoming the directive's adoption, the European Commission said the new rules "pave the way for a better business environment and reduced costs for small alcohol-producing businesses."

Counterfeiting tackled

"Consumer health will also benefit from a crackdown on the illegal use of tax-free denatured alcohol to make counterfeit drinks," the Commission statement continued.

The directive will allow member states "under strict conditions" to waive or lower excise duty on small volumes of fruit spirits made by individuals from fruit grown on their own land.

But member applying reduced rates or exemptions will have "to take the necessary measures to prevent any evasion, avoidance or abuse," such as registration of stills with details of their production capacity.

Moreover, member states will have to apply "effective, proportionate and dissuasive" penalties to anybody that abuses the system to produce low or no duty alcohol illegally.

The Commission is to monitor the introduction of national waivers or reduced excise rates for private production and report back to the Council on its findings.

EU Commissioner for Economy Paolo Gentiloni said that the agreement "is a welcome move towards a more modern and fairer tax regime for alcohol which also supports our fight against fraud."

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.