The prelininary adoption by the EU of revised excise structures has been deemed as structurally discriminatory by Drinks Ireland|Spirits, the representative body for spirits producers in Ireland.
Due to existing unbalances in the single market, the EU is currently undertaking a modernisation programme to address the way alcoholic products are taxed.
However Drinks Ireland|Spirits said that the new Directive will widen the disparity between tax breaks for craft distilleries versus craft brewers.
In agreeing the directive, member states, including Ireland, decided not to extend the reduced rate of excise to smaller craft distillers and other spirits sector SMEs. This decision increases distortion and discrimination in the single market as the revised text creates additional tax privileges for some alcoholic beverage categories but does not offer the same opportunity to others.
Drinks Ireland|Spirits believes that excise tax reform should ensure that all craft drinks producers can access relief schemes. Under the current rules, small brewers are allowed to produce 1,000 times the amount of pure alcohol that start-up distillers can produce before full excise rates apply. This means a craft brewer can produce 1,000,000 litres of beer before full excise applies, whereas craft distillers can only produce 1,000 litres before a (much higher) excise rate is charged.
Commercially, this allows a craft brewer to generate around €15m revenue each year before paying full excise while a craft distiller can only generate about €30,000. The net result is a 50% tax break for the craft brewer and 0% tax break for a low-alcohol spirit-based drinks producer.
Ulrich Adam, Director General at SpiritsEUROPE, said: “The Council’s decision claims to reduce distortions in the single market – in fact, the opposite will happen. The revised text creates additional tax privileges for small brewers and cider makers but does not allow the same opportunity to small, independent distillers. This is unacceptable.”
“Reduced tax rates can facilitate product innovation. It is illogical, however, that these reduced rates are not applied equally across all alcoholic beverages categories. Ireland’s highly innovative SME distillers deserve better than the discriminatory treatment that has been outlined in this decision. They produce high-quality products and generate growth and jobs throughout the country,” said Drinks Ireland|Spirits in a statement.
“During the COVID-19 crisis, smaller distilleries in rural areas in particular stepped up and supported both their local communities and central Government by switching production to produce alcohol gel hand sanitizer. Now, they have seen a decision taken which fails to give them the structural support they need to aid in their post-COVID-19 recovery.”