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The position of the Management Board of the Union of Brewing Industry Employers in Poland – Polish Brewers on plans to increase beer excise duty by 10%
Opublikowano: 14 November 2019Higher prices for consumers, a decline in sales, uncertain budgetary revenue
An increase in beer excise duty by 10% will trigger a rise in beer prices, a slump in sales, lower-than-expected budgetary revenue and the risk of losing jobs related to beer production and sales in Poland.
It is with great consternation that we have learnt of the government bill, announced today without public consultations, that increases the rate of the beer excise duty by 10%, an amount three times higher than originally projected.
In line with the draft government budget for 2020 adopted in September this year by the Council of Ministers and the official position presented by the Ministry of Finance, the brewery sector has expected an increase in beer excise duty by 3% from 2020. Such change in the rate of the excise duty was also presented in the National Multi-Annual Financial Plan 2019-2022 adopted by the Council of Ministers this April and submitted by Poland to the European Commission.
We have reiterated on multiple occasions that a higher-than-planned increase in excise duty will lead to a radical reduction in the economic impact of the industry, a decrease in the production volume and job losses. A rise in the rate will become a factor that will stifle development of the beer category and reduce the competitive edge of Polish beer.
The currently announced increase in the excise duty should be also considered in a broader perspective. In addition to the higher excise duty, the brewing industry is facing many other major cost challenges, including significantly higher labour costs, proposed amendments in social insurance contribution, higher raw material and energy costs, etc. A great many cost pressures accumulated over the same period of time may lead to a stagnation or even a downturn in the brewing industry, what may in turn have a negative impact on the employment level and is likely to reduce the revenue of the state budget.
We should keep in mind that beer production and sales create 157,000 jobs in various sectors of the Polish economy – in packaging production, transport, trade, gastronomy and agriculture. We estimate that a possible decline in the volume of beer production will particularly affect 22,000 people employed in agriculture and food processing that supply the Polish brewing sector with hops and cereal and trade where beer provides 48,000 people with a source of income. These are usually small stores as beer is marketed in Poland in 85,000 points of sale, including 78,000 small-format stores which are often small family-run businesses.
We are convinced that following an increase in beer prices triggered by a dramatic rise in the excise duty and consequent slump in the sales volume, it will be impossible to ensure the projected revenue for the state budget. The sector was affected by the negative fallout of increased beer excise duty in 2009. The beer market contracted by more than 4%, while employment in production and sales was down by 24% with budgetary revenue twice as lower than projected. It took three years for the brewing sector to restore the market to the pre-increase level.
This experience clearly shows that a substantial change in the excise duty stifles development of the beer category, diminishes the sector’s economic impact and compromises the competitive edge of beer brewed in Poland. All the more so as this change is unexpected, what destabilises operations of the entire sector. Planning our activities for 2020, we assumed an increase in the excise duty by 3% as announced in two key government documents. A three-fold increase announced six weeks before the new year makes it impossible for us to make proper plans for the next year as production, sales, raw material purchases, etc. in the brewing industry are planned many months or even a year in advance.
Already today the brewing sector in Poland is the largest payer of the excise duty in the European Union after the United Kingdom and France. Polish beer consumers pay 2.5-fold higher excise duty than residents of Germany and several dozen times higher than Czechs and Slovaks. Beer made in Poland generates EUR 829.4 million worth of revenue for the state budget, an amount higher by 25% versus Germany where beer production is more than double.
We are the third largest beer producer in Europe and the largest payer of excise duty in the region. Currently, beer excise duty in Poland totals EUR 22/hl and is nearly higher by 240% compared to Germany (EUR 9.4/hl), by 50% versus the Czech Republic (EUR 14.69) and by 28% than the excise duty rate in Slovakia (EUR 17.22/hl). A further increase in the Polish beer excise duty will compromise the competitiveness of the product brewed in our country compared to beer from neighbouring markets. This will increase its uncontrolled imports which is permitted by EU regulations as anyone may bring 110 litres of beer from another country for their own use. A similar situation took place on the Estonian market where it led to a decline of the local beer market.
The brewing sector in Poland has always been a stable tax payer as well as a predictable and reliable partner for the government. Which is why we expect arguments we have presented to be treated seriously. It is unacceptable to have such substantial change like the amendment of the excise duty rate introduced by surprise and contrary to publicly announced plans and drafts. Such decision requires thorough consultations and a reliable evaluation of impact conducted together with all stakeholders within the framework of the Social and Civil Dialogue. We appeal to the government to respect previously adopted assumptions and persistently uphold the adopted 3 per cent increase which was announced on multiple occasions.
