NCPA - National Center for Policy Analysis

COMPETING OVER ALCOHOL TAXES

February 1, 2005

Consumers are taking advantage of large disparities in alcohol tax rates in Europe, writes John W. Miller of the Wall Street Journal.

European Union (EU) officials are trying to build a single market of goods and services, but things break down when differing retail taxes mean consumers can get better deals in a neighboring country. This is particularly true for taxes on beer, wine and spirits:

  • Excise taxes on beer per 100 liters (26.42 gallons) divided by the percentage of alcohol content ranges from about $25 in Ireland and Finland to $2 in Italy and a $1.05 in Spain.
  • The British government lost $1.4 billion in alcohol tax revenue in 2000-2001, as a result of citizens buying beer in France where taxes are lower ($3 per 100 liters versus $23 in Britain).
  • The Finnish government estimates its loses $390 million in tax revenue from cross-border shoppers in 2004; every year Finns make 6.1 million trips to neighboring Estonia, where taxes on alcohol are one-fourth to one-twentieth as high.

Harmonizing EU tax rates on alcohol is difficult because of cultural differences between countries: low taxes pervade wine-loving nations like Italy and France, while high taxes are imposed in areas struggling with alcohol abuse such as Scandinavia. Other nations, such as Estonia, like to maintain cheap alcohol prices to attract tourists.

Source: John W. Miller, "EU Runs into Tax Trouble," Wall Street Journal, January 27, 2005.

For WSJ text (subscription required):

http://online.wsj.com/article/0,,SB110669101683235779-search,00.html

 

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