Alcopops and excise duty: what’s going on?

Iain Dale’s famous blog linked the other day to a post at the EU Referendum blog, which suggests EU law may prevent the UK from imposing a higher rate of duty on alcopops, and casts doubt on Tory claims that this would be permissible as long as the duty is calculated by reference to alcohol content.

EU Referendum is a bit confused about the applicable law, but I think they have a good point; the suggestion from “Labour sources” that a targeted duty would breach EU law may well be rights.

While it’s true that article 90 of the EC Treaty prohibits discriminatory and protectionist taxation –

No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.

– there’s no reason to believe a higher tax on alcopops would discriminate – I imagine most of them are produced in this country, and so long as a substantial proportion of them are, and these are treated the same as imported alcopops, I see no difficulty. Nor, again, would there seem to be anything protectionist in the policy, unless alcopops were mainly produced abroad.

But EU Referendum also suggests Directive 92/83 limits what the UK can do – and I think there’s more to this. The provisions are complex (it’s one of those fatally boring technical Directives), but it harmonises the structure of excise duty. Under article 13 Member States must charge the same rate of duty on all products that fall within the category “other fermented beverages” (which I think would cover alcopops based on wine) and under article 21 they must charge the same rate on spirits (which would include alcopops based on vodka and so on). So, it does indeed seem that alcopops can’t be singled out from other wines or spirits.

So, if that’s right, how come some members states think they can get away with higher rates on alcopops? And how how come the Commission knows it (see these answers to a Luxembourgeoise MEP) and yet is doing nothing?

I suspect this may be a question of politics and risk. Against the background of increasing concern about alcopops across Europe, I suspect the Commission may be considering amending EU legislation to deal with them, and that infraction proceedings against member states are a very low priority.