Danish way to deal with beer border trade

www.bryggeriforeningen.dk

21. May 2015

Danish Excise Duties and the Border Trade with Germany

Niels Hald CEODanish Brewers’ Association

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Breweries are creating jobs all over Denmark

http://www.olakademiet.dk/?pid=29&mid=4&sub=3&fid=2&bryggeri=57

Work Places in Denmark:• 3500 jobs at the breweries• 18500 beer generated jobs within agriculture,

cafes and restaurants, retail sector etc.

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Contribution made by Danish Breweries


Globale Work Places:• Danish Breweries employs 45,000 people worldwide

3.500 workers creates 18.500 work places

Differences in excise duties create border trade in open economies

4www.bryggeriforeningen.dk

High Danish excise duties and VAT on beer creates border trade

Beer and Soft Drinks are traffic buil-ders in the cross border trade

Increases in the excise duties on beer in-creases the total cross border sales

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Beer and Soft Drinks are traffic buil-ders in the Cross Border Trade

Source: Norstat, 2014

46 % af all danes are buying goods at the border one or more times at the

border (2014)

The Cross Border Trade started with traditional border trade goods like alcohol

and tobacco, but has since expanded to grocery shopping.

Goods Danish consumers are buying in the German border shops Beer 79%Soft Drinks 87%Wine 56%Spirits 43%Candy 69%Groceries 56%Tobacco 9%

Excise duties increased 2012 og 2013

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National Budget 2012:

• 1. January 2012– Excise on Beer: + 25%– Excise on Soft Drinks (sugar sweetened): + 50 øre

- From 1,08 DKK/litre to 1,58 DKK/litre (+ 46 %)

• 1. january 2013– Excise on Beer and Soft Drinks: + 3,6% (indexation)


• A wide political majority adopts a growth plan (spring 2013). The aim is to withdraw border trade with beer and Soft Drinks to Denmark

• 1. July 2013– Excise on Soft Drink: - 50 %– Excise on Beer: - 15 %

• 1. January 2014– Abolition of the Excise on Soft Drinks

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Growth Plan 2013: Reduced excise duties


Effects on Excise changes


2012 Excise Domestic sale Cross border saleBeer + 25 % - 8 % + 14 %Soft Drinks + 46 % - 7 % +14 %

2013 Excise 1) Domestic sale 2) Cross border saleBeer - 15 % + 1 % - 9 %Soft Drinks - 50 % + 8 % - 19 %

1) Excise reduction 1. july 20132) Sale 2. half of 2013

Sources: Border sale: Danish Ministry of taxation, Status over grænsehandel 2014Sale in Denmark: Bryggeriforeningen

Danish ministry of taxation, Status for the Cross Border trade 2014

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• The ambitions for the Growth Plan - increased domestic sales and reduced cross border sale - are met

• The Ministry of Taxation concludes that Growth Plan ”seems to work”

• The report ”Grænsehandelsrapporten 2014” verifies that Beer is a traffic builder for cross border sale at the Danish-German border:

Despite increases on excises on RTD and wine in 2013:• RTD/Cider sale at the border: - 20 % in 2013• Wine sale at the border: - 25 % in 2013


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The price of beer and soft drinks has decreased - more than the duty cut justifies!


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2014M01

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2015M0180

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Consumerprices since June 2013 Kilde Danmarks Statistik, forbrugerpriser

Forbrugerprisindeks i alt Sodavand, mineralvand og juiceØl

Beer and Soft Drink sale in Denmark


2012 - 1

2012 - 2

2013 - 1

2013 - 2

2014 - 1

2015 - 1

-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0

10.012.0

Sale of beer in DKHalvårssalg sammenlignet

med tilsvarende periode året før

2012 - 1

2012 - 2

2013 - 1

2013 - 2

2014 - 1

2015 - 1

-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0

10.012.0

Sale of Soft Drinks in DKHalvårssalg sammenlignet

med tilsvarende periode året før

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Regulating the EU single market

• TFEU regulates competition between similar and competing products – TFEU article 110 prohibits discriminatory and protectionist taxes

• Beer and wine are made of different raw materials and by different methods and therefore not similar products, but to some extent competing products

• According to the EU Court, the Directive allows Member States flexibility to adjust their charges to competing products in such a way that they do not violate the TFEU article 110


Ernst & Young has analyzed court judgment C-167/05(the Commissionen vs. Sweden)

Conclusion:

Without reducing the excise duty on wine:• 25 % reduction on excise on beer is in accordance with the EU

legislation• 50 % reduction on excise on beer in Denmark is likely to be in

accordance with the EU legislation taking into acount the current beer and wine prices in Denmark

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Ernst & Young: Legal advisory opinion opens for lowering the excise duty on beer


Sales

Danish way to deal with beer border trade