Brewers warning on stiff taxes

Poland's major brewers warned last week that unless the government reduces its steep levies on their products by the time the country joins the European Union (EU), beer drinkers will start traveling to neighboring countries to shop for beer.

At a press conference organized by the Polish Brewing Industry Association of Employers (ZPPPP), Marcin Piróg, chairman of Danish brewery Carlsberg Okocim, said that when Poland lifts restrictions on the amount of beer that can be brought into the country once it joins the EU, Poles will start buying beer in Germany, Slovakia and the Czech Republic, where prices are significantly lower. The result is that Polish producers could see sales drop, leading to cuts in production and higher unemployment levels.

"Taxation levels in Poland will lead Poles to buy their beer in neighboring countries, where taxation is lower," Piróg said.

Poland's 22% VAT is higher than its two big beer-producing neighbors - the Czech Republic (19%), and Germany (16%). In addition, Polish excise taxes are a stiff 16.33%, compared to 9.86% in Germany and 8.38% in the Czech Republic, according to Piwochmiel, a beer market research company.

Piróg compares the situation to Denmark, where high taxes have encouraged Danes to travel to Germany to shop for beer. "German VAT is 16% and Danish VAT is 25%," said Margarethe Skov, Carlsberg's spokeswoman. "As a result, about 20% of Danish beer consumption is bought in Germany."

Polish beer consumption has increased steadily in the past 16 years, rising from 26.5 liters per capita in 1985 to 66.2 liters last year. But while production grew from 12.7 million hectoliters in 1993 to 24 million in 2000, brewers are concerned that this year's output is set to remain at the same level.

To combat a decline in sales after EU entry, ZPPPP members would like to see the excise duty and VAT rates reduced to match those in neighboring countries. "The target for next year will be to stay at the same level and in the following years to move toward the levels in the Czech Republic, Slovakia and Germany," said Nico Nusmeier, chairman of Żywiec Group. "Otherwise we will have a serious problem with employment in the brewery industry in Poland. We are confident that in dialogue with the government we will move things in the right direction." He added that this year's excise tax increases, which totaled 18%, cost the Żywiec Group a minimum of zł. 50 million ($12 million) in sales.

Jerzy Malibruda, director of the Polish Agency for Prevention of Alcohol-Related Problems (PARPA), is not opposed to a minor reduction in the taxation of beer as the beverage's growing popularity is helping to topple vodka as the national drink of choice. The share of vodka in Poland's alcohol market has fallen from 55.84% in 1995 to 29.67% in 2000, while beer has grown steadily from 31.1% in 1995 to 49.11% in last year.

Greg Goodale