The brewing industry’s attitude towards the proposal to raise the excise tax

Opublikowano: 3 grudnia 2008

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The idea to create by the government the Reserves of Social Solidarity, particularly for the support of the poorest social layers, is entirely relevant and socially useful. However, the idea to raise funds for the above mentioned reserves awakens enormous doubts of the brewing industry and seems to be faulty because it can bring results opposite to the expected ones.

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The planned raise of the excise tax on beer, considering its unprecedented height and the lack of fair proportions vis-a-vis other alcohol products (disproportions contradictory to the art. 10 of the Act on education in sobriety and alcoholism counteraction) as well as the negative impact on operational conditions and labour market can bring lower budget revenues because lower beer sales should be expected.

1. The proposed changes are introduced violently, rapidly and suddenly, in a way which makes it impossible to the companies to well prepare for economic operations in the new year and which makes it impossible to adjust plans, particularly in a situation where the industry had been many times assured that the raise of the excise tax was not planned. At present, the majority of serious companies ended the process of budget creation for the next year and such significant changes in the operations conditions introduced in such a sudden way mean serious difficulties in their economic activity. Thus it does not help the predictability of the business environment, which is a key element for investors keen on investing in a given country.

2. The brewing industry, although it was bringing to the budget more than planned until the year 2007, shows a slowdown in sales in the current year. And even if the situation is still stable, the potential raise of the excise stops the dynamics and the budget inflows from taxation, the excise can turn out to be lower.

3. The change of the excise tax stake was not consulted with the industry, with the cooperating industries and nor with the trade unions. The expected economic and social results of this significant change were not presented either. Such practice is contradictory to the principles of a good legislation and cannot be reconciled with the conviction of the need of respect in the mutual relations of the state and the society.

4. The taxes imposed by the state on beer in other countries indicate that, on average, they constitute roughly 14% of the retail beer price. In many regions there is however a strong difference in taxation. In Poland low retail beer prices are accompanied by particularly high taxation, which constitutes 39% of the retail beer price. It is one of the highest indicators in Europe. For instance, the stake of the excise tax in neighbouring countries such as the Czech Republic or Germany is roughly one half of the one in Poland. The stake of the beer excise defined in the Directive 92/84/EEC amounts to 0,748 € / hl / ° Plato, while in our country it amounts to 1,81 € / hl / ° Plato.

The always differentiated taxation in neighbouring countries results in an increase of trans-border trade, the so-called private import and in extreme cases even in smuggling because it starts to pay off although on the other hand it exposes the state of a high tax to losses. Also the scale of the proposed beer excise increase is unprecedented. Such high excise increases have not been noticed even in times of a high growth of the beer market. Meanwhile the beer market does not grow with such a pace as in the last years. The slowdown of the market growth started with a dramatic increase of the excise tax in 2001. At the time the market reacted sharply to the excise increase equaling 16.5%: the market growth amounted as a result of the introduction of the excise in question to 0.2% only whereas just a year before, in 2000, the growth dynamics reached 8%. In the consecutive year 2002, in which the excise level remained unchanged, beer sales increase on the domestic market almost returned to its previous level equaling 5.2% but it did not sustainably reach the figure from before the dramatic increase.

5. Sales achieved by the brewing industry in the last months indicate that the beer market enters into a stage of regression, considering that it is saturated at the very moment. The recently noticed decrease of beer consumption results from achieving the level exceeding the European average (i.e. over 93 liters per inhabitant) as well as from increasing beer prices provoked by a considerable increase of production costs (mainly the increase of the costs of hop, malt and packaging (bottles and cans) purchasing as well as a considerable increase of salaries). The increase of the prices in that period was not sufficient to cover additional costs. To our knowledge, the market will react to a 17% excise tax increase with a violent breakdown. The dramatic deterioration of breweries’ conditions will negatively influence the labour market, and this not only in the brewing industry but also in many cooperating industries. The collapse of beer sales can give the so-called snowball effect. The brewing industry in Poland directly employs over 115 thousand persons, while simultaneously thanks to the cooperation with the brewing industry only, another 56.2 thousand persons found a job. Together with the employment in HORECA (gastronomy and tourism) as well as in trade, 186 thousand people live from the brewing industry. Together with their families this group amounts to over 740 thousand people. The brewing industry generates significant and increasing inflows into the state budget, amounting to roughly 1.2 billion Euro per year. Now this figure will be lower, as can be seen in the data from previous years as well as from the example of Slovakia, where the excise tax has been increased.

The brewing industry decisively protests against the planned beer excise increase, considering this way of change introduction to be harmful both for the economy and the society.

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