The last change in excise duty rates to ethyl alcohol and tobacco products occurred 1 January 2014. Soon we will probably have another one, and that's quite a big one.
14 November 2019 The government adopted a draft amendment to the Excise Tax Act. The Act provides for indexation of the rate of excise duty with an increase by 10% for, inter alia, ethyl alcohol, beer, wine and tobacco products.
Effects of the amendment to the Act on Consumers
The increase in excise duty rates will certainly affect the prices of excise goods. Moreover, the justification for the draft law presents a likely increase in product prices. According to him, from 1 January 2020 consumers may expect an increase in price:
- • packs of cigarettes (20 pieces) o 1.02 PLN;
- • 0.5 litres of vodka (40%) o 1.4 PLN;
- • 0.5 litres of beer (with a content of 12 Placebo) o 0.06 PLN;
- • 0.75 litre of wine o 0.15 PLN.
Although nominal increases do not seem significant, it should be remembered that already Polish beer consumers pay excise duty 2.5-twice as high as Germany and several dozen percent higher than the Czechs and Slovaks.
Jumping increases in excise duty rates will affect product prices, which in turn can increase the share of the grey zone.
The effects of the amendment of the Act on the State Treasury
The government foresees that indexing rates will provide the state budget In 2020 additional revenue at the level 1,698,700,000 PLN. During the period 10 years after the entry into force of the changes, revenue is to be almost 17,000,000,000 PLN.
The plans to date did not predict that indexation would be greater than 10%. Originally, the budget bill assumed that the increase in excise duty would be 3% and will bring additional budget 1,015,000,000 PLN during the year. 3% indexation was also forecasted by the Multiannual Financial Plan of the State for years 2019-2022 submitted by Poland to the European Commission.
Although the excise duty itself has a strictly financial objective, the government indicates that the bill is to have a positive impact on the health of Poles. According to the project's authors, increased excise duty will reduce the use of these drugs. Some experts point out that this objective will not be achieved, however, as government action will increase sales in the grey area, which will provide access to alcohol and cigarettes outside state control.
The effects of the amendment of the Act on entrepreneurs
In a much less positive tone, entrepreneurs speak about the project. They point to the negative consequences of such a significant indexation of rates. The very way of dealing with entrepreneurs raises fundamental doubts. The government adopted the project on a circular basis, without public consultation. The level of indexation of excise duty rates has caused surprise, as the industry is not prepared for its growth until 10%.
Planning actions on 2020, industry included 3% indexation. The currently proposed over three times increase in this value, plus one and a half months before the start of the new year, is a very big problem, as it does not give entrepreneurs the opportunity to properly plan the next year.
Production, sale or purchase of raw materials is often planned with months or even a year in advance.
Entrepreneurs from the organization Employers of the Republic of Poland indicate that this way of making changes violates the principle of legal certainty and acts negatively on the certainty of trade and the development of entrepreneurship.
Cider will remain preferentially taxed
Ciders have been excluded from excise indexation, which will remain subject to preferential excise duty (97 PLN from 1 the hectolitre of finished product). The justification for the preferential excise duty rate for cider is to support the development of this segment of the market and the indirect promotion of orchard production, which is one from the pillars of Polish agriculture.
Specific problem of the brewing industry
However, such preferential treatment could not be counted upon by the brewing industry, which speaks of the project in a particularly unfavourable tone. The Association of Employers of Beer Industry – Polish Brewery indicates that the increase in excise duties combined with other cost pressures can lead to stagnation or even a collapse of the brewing industry.
This industry ten years ago, she experienced the negative effects of a tax increase. The beer market then decreased by more than 4%, and employment in this sector has fallen by 24%. The revenues of the state budget after the then increase proved to be twice as low as expected. The brewing industry needed until three years to rebuild the market to pre-increase levels.
The brewing industry in Poland is the largest (after Great Britain and France) excise duty payer for beer in the European Union. Currently beer production and sales generates in the Polish economy 157,000 jobs. From beer produced in Poland to the state budget 829,400,000 EUR A year.
Electronic cigarettes without excise duty 1 July 2020
For electronic cigarettes until the end of June 2020 there is a zero excise duty. These products will be taxed at an effective rate of excise duty from 1 July 2020
In conclusion, it can be concluded that the tax increase always involves a negative social reception, as it makes more money disappear from consumers' pockets. However, there are more negative factors. Jumping increases in excise duty rates will affect product prices, which in turn can increase the share of the grey zone.
The increase in excise duties to a greater extent than previously planned can also lead to a radical reduction in the economic impact of the industry, a reduction in production volumes and job losses.