FM to cut beer and wine excise tax

Lower rates in EU countries would leave Polish retailers at a disadvantage

By Aleksander Nowacki

Taking a cue from the increase in revenues after the tax on spirits was slashed 30 percent last year, the Finance Ministry has unveiled a proposal to lower the excise tax on beer and wine twice in 2004.

"The beer and wine excise tax rate could well be altered," Deputy Finance Minister Robert Kwaśniak said. "This is likely especially in the case of beer, which is subject to much heavier taxation here than in neighboring countries." The current excise rate on beer stands at E1.68 per hectoliter, as compared to €0.748 per hectoliter in neighboring countries.

"The first substantial cut will take place on January 1," said Edmund Cichowski, excise tax department director at the Finance Ministry. "We will continue to monitor the market, and a follow-up is possible at the moment of accession (May 2004)." He went on to say that the benefits are unlikely to be felt immediately.

"There is no substantial gray market as yet," explained Krzysztof Rut, spokesman for Grupa Żywiec. "But once the borders are open, we would get in serious trouble if the tax wasn't cut." European Union law allows its citizens to take up to 100 liters of beer across the borders of member states. In Denmark, where excise tax is double that in Germany, open borders have led to 20 percent of output being exported to the neighboring country, only to be re-imported by private individuals.

"If a similar scenario happens here, it will spell doom for the whole industry," Rut said. "The ministry's decision will bring long-term benefits to both breweries and the state budget." He said, however, that the cut will not boost sales, as the current level of beer consumption, standing at 68 liters per capita per year, is determined by cultural, rather than economic, reasons.

According to industry insiders, the tax could be slashed by 20 to 30 percent, although no figures are available as of yet. The beer industry is one of the few sectors of the economy that is enjoying a very good year, with rising sales and profit margins. The Finance Ministry's recent announcement is likely to ensure that the trend continues in the years to come.