Taxing the Brewing Sector: a European Analysis of the Costs of Producing Beer and the Impact of Excise Duties

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Taxing the brewing sector: a European analysis of the costs of producing beer and the impact of excise duties * A Report for The Brewers of Europe

September 2010

*connectedthinking 


PricewaterhouseCoopers was created in 1998 by the merger of two firms – Pricewaterhouse and Coopers & Lybrand - each with historical roots going back some 150 years. Drawing on the talents of more than 139,000 people in 148 countries, PricewaterhouseCoopers provides a full range of advisory, financial, human resources and training, and strategy & security services to leading global, national and local companies and to public institutions, including national governments and international institutions. The Brewers of Europe, founded in 1958 and based in Brussels, is the voice of the European brewing sector to the European institutions and international organizations. Current members are the national brewers’ associations from EU Member States, plus Norway, Switzerland and Turkey. This report has been prepared solely for The Brewers of Europe. The report sets out the work undertaken by PwC into the impact of excise taxation on the brewing sector at national level and European level, and on the comparable cost analysis of the alcoholic beverages sector at European level. As part of this study we obtained relevant information regarding direct and indirect employment generated by the relevant sectors and have been asked by The Brewers of Europe to include comments on this area within our report. The study has been prepared in accordance with our letter of engagement dated May 25, 2009 and attached terms and conditions. The main work has been undertaken until October 2009 with further developments afterwards. PwC accepts no liability or responsibility of any kind from any third party in connection with the use or misuse of the contents of this report without the previous authorization of PwC.

Executive Summary
PricewaterhouseCoopers Asesores de Negocios, S.L. (PricewaterhouseCoopers or PwC) has undertaken an analysis for The Brewers of Europe into the impact of changes in excise taxes across the European Union (EU). The analysis considers the impact on consumption, Government revenues, profitability in the brewing sector and direct and indirect employment and is laid out in Chapter I of this report. PwC were also commissioned by The Brewers of Europe to study the comparable costs in the route to market for the different categories of alcoholic beverages across the European Union. The focus of that part of the report - Chapter II - has been on the main drinks categories, being beer, wine and spirits. The basis for taxation of alcoholic beverages in the European Union is contained in a number of Directives, which establish a framework that determines the methodology for taxing the different drinks categories and the minimum rates of taxation to be applied. However, the framework leaves to individual Member States setting the level of rates of excise duties, which can be applied differently to the different alcoholic drinks categories. As part of this study, PwC has additionally considered the impact of the differing rates of excise taxation of each drink category in the cost to market for that product. During the course of this study it was necessary for PwC to investigate the cost of wages and other salary related costs. From this work PwC obtained information regarding direct and indirect employment generated by the overall alcoholic beverage sector. We have also included employment findings in this report. The conclusions and key findings of the study come from a detailed analysis of publicly available data for seven representative countries, representing each one a cluster of countries, and selected following a number of parameters. The main results from our analysis are the following: Chapter I – Impact of tax changes  First. We have found evidence of different impact of excise tax rises in the on-trade (bars,...
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