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Graph 2.5. / Development (%) VAT rates Jan. 2008 – July 2011
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Source : European Commission, situation as of July 2011
Development 2010-July 2011
Development 2009-2010
Development 2008-2009
0%
5%
10%
15%
20%
25%
30%
FI
PL
CZ
SK
EE
ES
UK
PT
LT
EL
LV
HU
RO
Consequences
It is realistic to assume that a part of the decrease in beer
consumption in the European Union can be explained by
the rise in excise and VAT rates in some of its Member
States, which has impacted consumption in the rest of
the EU
7
.The explanation is that excise and VAT rises are
to some extent passed on in consumer prices. Although it
is partly passed through, the rises also have an impact on
the proftability of the whole chain due to lower investment
levels, closing activities and similar effects.
In addition, it is important to note that the demand for beer
is price elastic. This means that a higher price (here due
to a rise in the excise and VAT rate) leads to a decrease
in demand for beer. The level of passing on is higher in
the hospitality sector than in the retail sector
8
, and the
demand for beer is also more price elastic in the hospitality
sector. This means that the same percentage increase
leads to a greater fall in consumption in the hospitality
than in the retail sector. Combining these research
fndings
9
would mean that higher excise and VAT rates will
decrease the consumption of beer in the hospitality sector
to an even greater extent than in the retail sector.
However, our calculations also show that the sale of beer in
the hospitality sector gives rise to relatively more jobs than in
the retail sector. Tax revenues are also higher when beer is
consumed in bars and restaurants. – Therefore job losses in
the hospitality sector result in lower government revenues.
Both the changes in so-called consumer taxes and
changes in consumption will infuence the revenues
from these taxes in different EU member states, and of
course for the EU as a whole. Graph 2.6 shows that in
the majority of European countries, excise revenues have
increased compared to 2009 (average 13%). The Czech
Republic, Greece and Latvia showed an increase in excise
revenue of over 20% compared to the previous year,
whereas Ireland, Denmark and Slovakia were among the
countries to experience a decrease in excise revenues.
In most Western European countries, excise revenues
in 2010 remained stable compared to 2008 and 2009.
The three Baltic countries displayed an increase in excise
revenues. Outside the European Union, this also applied to
Switzerland and Turkey. Finally it is important to note that
government revenues on VAT and excise rates may also
be impacted after a longer time lag.
7
Source : PriceWaterhouseCoopers, Taxing the brewing sector : a European analysis of the costs of producing beer and the impact of excise duties, 2010.
8
One explanation is that off trade excises rises can be absorbed more easily because there are much more different product streams than in the hospitality.
9
Same as footnote 6.
02
25
Government revenues