The long-term politically explosive topic of wine taxation was originally discussed as part of the consolidation package. Even with the contribution of the people, however, it was left out of the set of measures to improve the state of the budget.
“At the moment, we have four variant solutions for consumption tax on still wine, but also on ciders and mead. In addition, the wine sector brought a completely different path, which does not go the way of consumption tax, but the introduction of a minimum price for the ethanol content in wine. We will continue to deal with this,” said Minister of Agriculture Marek Výborný (KDU-ČSL).
Alternative solutions consist in the introduction of consumption tax in four graduated rates, which would range from 25% to the full rate, which would correspond to the current tax on sparkling wine of CZK 23.40.
A new solution consisting in the introduction of a minimum price for ethanol was proposed by the Union of Winemakers at the meeting of the working group on wine taxation. Its chairman, Martin Chlad, described it as absolutely unsystematic to come up with an excise tax without amending European legislation.
“We would thus be able to respond effectively to risky consumption in the critical category of the cheapest wines. It’s the low-quality wines. We are convinced that this would mean selection effects for the state, as the cheapest wines would become more expensive, as well as on the expenditure side due to savings on alcohol for the groups that consume it,” said Chlad.
The working group will deal with the proposal. It is attended by representatives of the government coalition, the Ministry of Agriculture, the Ministry of Health and the Ministry of Finance, representatives of the Customs Administration, wine associations and the Governor of the South Moravian Region.
The impact on the budget is not yet clear. The minister did not say which option he preferred. However, he said that no one wants to maintain the status quo where wine is favored by having zero excise duty.
However, the minister expressed some sympathy for this proposal. According to him, the government wants to fight alcohol consumption, he also indicated that imported wines are often of dubious quality. “It could be something that fulfills the goal of the Ministry of Agriculture to find a fair model for Czech wine producers,” he said, adding that the institution of introducing a minimum price for ethanol could eliminate the gray zone. It is to be worked out in detail by the Ministry of Finance.
A similar minimum price model for ethanol is applied, for example, by Ireland and Scotland. According to Výborný, it is realistic to approve some solution by this government.
The long-term politically explosive topic of still wine taxation was originally discussed as part of the consolidation package. Even with the contribution of the KDU-ČSL, however, it found itself outside the set of measures intended to improve the state of the budget. Winemakers have now rushed forward with a new study that provides further arguments why wine should not be taxed.
The study, commissioned by the Wine Fund by the Focus agency in cooperation with Ernst & Young, estimated the income from taxation of still wine at 3.43 billion crowns. However, it should actually be much lower.
According to the study, with the decrease in wine consumption as a result of the introduction of the consumption tax, other revenues will also decrease – from VAT or levies on employees, at the same time unemployment will increase and the black market will also increase. The study calculated the total benefit of wine taxation at only 1.45 billion crowns. This is the least of all studies that have recently been created on this topic.
And much less than what the Department of Finance had expected. Its boss Zbyněk Stanjura (ODS) estimated in the spring of this year that the tax on still wine would bring 4.2 billion crowns to the state budget. According to winemakers, the number is absurdly high.
Still wine is the only drink for which producers do not pay consumption tax. Sparkling wine is taxed at CZK 23.40 per liter. In 2019, it brought 400 million crowns to the state coffers.
“Low” tax collection is not the only argument of winemakers for leaving the zero rate. They argued that this would favor cheap imported wines, which account for up to 70 percent of wines in retail chains, and that the move would primarily harm smaller winemakers, who would be burdened by administration such as the mandatory setting up of bonded warehouses.
Of the neighboring countries, only Poland has introduced a tax on wine, and that is minimal. According to the Global Excise Tax Application and Trends study, in 2021 it was 0.29 euros (seven crowns) for a 0.75 liter bottle. Wine is taxed the most in Scandinavia. On the contrary, almost all wine-growing regions in the center and south of Europe apply zero tax on still wine, or only a minimal one, such as France (0.03 euros per 0.75 liter).