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European Study Shows Raising Beer Taxes A Bad Idea

Earlier this month, the Brewers of Europe — a trade organization of European breweries — released the results of an independent study they commissioned by PriceWaterhouseCoopers. They asked PWC to “quantify the impact of excise taxes on the overall tax collection, and employment and profitability in the brewing sector compared to other alcoholic beverages.” In Europe, like in the United States, a poor economy coupled with tireless anti-alcohol organizations are causing some politicians to look to the alcohol industry to help fund problems not of their making in the form of higher taxes. The entire report, Taxing the Brewing Sector: A European Analysis of the Costs of Producing Beer and the Impact of Excise Duties, is available online.

They also released a press release, highlighting the findings. From the press release:

“The study provides strong evidence that arbitrary increases in excise tax would hit brewers — and the 1.8 million jobs created in the European hospitality sector generated by the brewing sector — hard just as the economy is striving to emerge from a deeply damaging recession. The study also shows that tax increases will ultimately NOT increase government revenues nor attain the expected levels.”

The study comes at a crucial time, with skyrocketing taxes on beer in some European countries as governments scramble to rake in cash. “At a time when regulators across Europe are looking at scenarios about taxation, we would urge them to give any plan a full economic reality check,” [said] Pierre-Olivier Bergeron, [secretary-general of the Brewers of Europe]. “This study provides the data for sound judgments.”

A comparative cost analysis within the study shows that producers of alcoholic beverages constitute a significant industry within the EU, worth €242.5bn in 2007 in terms of sales. Sales of beer account for the highest proportion by value — €111.5bn or 46%. Beer contributed the highest amount of taxes to Member States across the EU and the lion’s share of jobs.

“This study shows that beer is the most expensive form of alcohol to produce,” observed Pierre-Olivier Bergeron. “So any move toward taxing all drinks based solely on alcohol content (‘unitary taxation’) would disadvantage a low alcohol beverage such as beer further in terms of cost of the product to the consumer.”

The study shows that an increase in excise taxes on the beer and hospitality sectors would be negative in terms of employment and tax collection. This is because increases in excise tax revenue are more than offset by decreases in the revenues obtained by the Government from personal and corporate income taxes, social security payments and, in some cases, from value added tax (VAT).

“The excise tax research shows that a 20% increase in beer excise taxes at national level across Europe would lead to loss of over 70,000 jobs and a fall in government revenues of €115 million EU-wide, due to lower sales and lower income from VAT and corporate taxes,” adds Pierre-Olivier Bergeron. “Also an increase of current EU minimum rates of excise tax will have no beneficial impact on the EU’s internal market or on national treasuries concerned. Plainly this is an ineffective measure for improving public finances and detrimental for brewers.” Bergeron concludes: “Europe’s brewing sector fully backs Europe 2020, the European strategy for smart, sustainable and inclusive growth. Our call for good sense and reason on the excise duty front fully meets the strategic objectives the EU has rightly set for itself, particularly in terms of fostering a high-employment economy.”

Perhaps the biggest finding is how many jobs would be lost if excise taxes were increased. The Marin Institute and the City of San Francisco insisted there would be no job losses if their recently proposed alcohol tax for the city passed. They were quite insulting, I believe, to the concerns of both local businesses and workers for even suggesting that was a potential outcome. This EU study does appear to lend credence to the claims made by many critics of the San Francisco Alcohol Tax, especially the California Alliance for Hospitality Jobs.

Naturally, critics of this study will undoubtedly point to its origin, having been commissioned by a trade organization. But the Brewers of Europe appear to have been very diligent in making the study as impartial as possible, and, perhaps more importantly, they’ve been extremely transparent and up front about their sponsorship of the study. That’s something that American anti-alcohol groups have not been as forthcoming about, with the more common scenario being that they fund academic institutions to conduct a study and then all but hide that fact, or at a minimum downplay it. Those same groups then use the studies they themselves commissioned in propaganda that tries to make them appear impartial or from an independent source, as was seen recently in the City of San Francisco’s nexus study supporting the alcohol tax. So at least this study involved no such subterfuge. People know exactly where it came from, can read the report and draw their own conclusions in full command of all the facts.

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