Liquor producers await Bauc response on excise taxes
Finance Minister Jaroslaw Bauc is expected to respond this week to an appeal by spirit producers not to increase excise taxes on liquor in 2001, the ministry said.
Among those firms anxiously awaiting the minister's response are the vodka-producing Polmos companies.
"The minister should (finally) admit that we are right (and not raise taxes)," said Henryk Tomasik, the director of state-owned Polmos Warszawa.
Last month, the National Spirits Industry Council (KRPS) appealed to Bauc not to increase the tax, which the ministry had indicated would rise by 6% in 2001. This year, the ministry increased excise taxes on liquor by 4% in March and an additional 2% in September.
According to the Finance Ministry, income from excise taxes on spirits amounted to zl. 4.3 billion ($955 million) in 1999, 17% below the ministry's expectations. Through the first eight months of this year, however, the state saw zl. 3 billion ($666 million) from liquor taxes flow into its coffers. Planned income from liquor taxes for all of 2000 is zl. 4.6 billion ($1.02 billion).
"We guarantee that the state budget's income (from liquor excise taxes) will be at least as much as if taxes were increased again," said Jozef Kapela, president of Polmos Bielsko-Biala and head of the KRPS.
The Polmos companies maintain that numerous excise tax increases 150% since 1994 have hampered their competitiveness and put them at a disadvantage to black market alternatives.
"Thirty percent of alcohol sales come from illegal producers (and smugglers)," Tomasik said. "And thanks to that, the state budget loses zl. 1.8 billion ($400 million) a year."
According to Kapela, state liquor production reached 140 million liters of pure spirits in 1994. "It would be great if we produced even 60 million liters this year," he said, adding that Polish taxes are among the highest in Europe. "It's similar to the excise tax in Germany, where producers pay DM 25 per liter of vodka."
In Poland, taxes for liquor run zl. 60.20 per liter of pure spirits (1 liter of pure spirits = 2.5 liters of vodka). "That's 68% of the net price of alcohol," he said. "Taxes (excise and VAT) comprise about 79-80% of the net price."
Analysts like Krzysztof Dzierzawski of the Adam Smith Research Centre said that Polish excise taxes are very high and that the ministry should think twice before raising them again.
"Today, the ministry should consider the case very deeply," he said. "And Bauc should balance the case well because what happens if excise taxes keep going up, but the budget's income keeps dropping?"
And not only has budget income been sagging, Dzierzawski said, but so have sales of legally produced alcohol.
"I think the ministry is aware of that," he said. "I think that the ministry should even consider decreasing the tax."
But Janusz Jankowiak, head economist at BRE Bank's department of strategy and development, said that the Polmoses can only dream about lower excise taxes.
"The ministry can't promise that, because it would be an empty promise," Jankowiak said.
Miroslaw Gronicki, an economist with BIG Bank Gdanski, agreed.
"(The producers) can forget about decreasing excise tax, because the budget has its needs," Gronicki said. At the same time, he said, the constantly rising excise taxes are adversely affecting the sales of legally produced liquors. He said the best situation would be for the tax to remain as is.
