State has gone over the limit with tax on alcoholic drinks

By Dimitra Manifava

The increase in taxation on alcoholic drinks has failed to achieve the government’s desired objective, with state revenues declining to levels last seen in 2009 – before the upward adjustment of value-added tax and the special consumption tax on alcoholic beverages (SCTAB) – as a result of the slump in consumption.

Furthermore, companies in the sector have seen their turnover shrink drastically, as consumption has plummeted 50 percent compared to 2009, due in part to the major increase in the illegal trade of alcoholic drinks.

According to data recently released by the Finance Ministry, in the first half of the year state revenues from the SCTAB amounted to 137.1 million euros, almost the same as in the first half of 2009, when revenues from the special consumption tax had come to 133.8 million euros. Notably, the special consumption tax on alcoholic beverages has increased from 2009 to date by a staggering 125 percent.

The latest available data from the Hellenic Association of Drinks Distributors (ENEAP) paint a similar picture: In the period from January to October 2012, state revenues from the receipt of SCTAB and VAT added up to 224.6 million euros, well below the 2009 level. In the same period in 2011 they had come to 290.7 million, in 2010 to 307.1 million and in 2009 to 258.8 million euros.

In other words, the increase in taxation on alcoholic drinks only managed to attain its target – i.e. to see more revenues enter state coffers – up until the end of 2011. The deepening recession and the fact that taxes remain particularly high (as VAT and SCTAB account for 57 percent of the retail price of popular alcoholic drinks) have resulted in a decline in alcoholic beverage consumption from 10.76 million hectoliters in the first six months of 2009 to just 5.6 million hectoliters in the first half of this year.

Besides the reduction in revenues for the state, the drop in consumption, which is attributed to a great extent to the increase in taxes, has resulted in the loss of some 10,000 jobs in the sector in 2010 alone and a reduction in the sector’s added value to the tune of 387 million euros in the same year.