This document summarizes a report on the financial effects of excise duties on beer in border trade in Nordic countries. It finds that 52.7% of Nordic beer consumers purchase beer abroad due to large differences in excise duties between Nordic countries and neighbors. This results in losses of over 1.1 billion euros annually in tax revenue for Nordic governments. Specifically, Finland loses 164 million euros annually in excise and VAT revenue from cross-border beer shopping. In addition to lost tax revenue, higher excise duties can reduce beer-related jobs and overall government revenue from decreased beer sales and production.

1. Financial effects of excise duties
on beer in border trade in the
Nordics
Walter de Wit
Partner, Ernst & Young, Amsterdam

2. Introduction
Report “Economic effects of high excise duties on beer” by Ernst & Young
and Regioplan Policy Research;
Research aimed at:
 Consequences of cross border shopping of beer;
 Consequences of high(er) excise duty rates on beer;
22 May 2015 [Presentation title]Page 1

3. Excise duty rates per hectolitre of beer in Euros (12 degrees Plato, 4.8%
alcohol) in the EU Member States and Norway on 1 July 2014.
22 May 2015 [Presentation title]Page 2
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
NO FI UK SE IE SI DK NL FR IT EL EE CY CR HU AT PL BE MT PT SK LV CZ LT ES RO LU DE BG
01-Jul-14
EU Minimum rate

4. Cross border shopping of beer in the Nordics
 As a result of large differences in excise duty rates on beer between the
Nordic countries and neighbouring countries, many Nordic consumers
purchase beer abroad;
 A total of 52.7% of Nordic beer consumers bought beer outside the
national borders between June 2013 and June 2014;
 328.4 million litres of beer (worth 1.0 billion euros) bought outside
national borders annually;
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5. Financial loss resulting from cross border shopping
Nordics, total
 The loss of VAT and excise duty revenues arising directly from cross-
border shopping for beer amounts to approximately 545 million Euros in
the Nordic countries (figures for legal purchases);
 Estimated that Nordic consumers spend approximately 2.0 billion Euros
in total on other products when they travel abroad to buy beer, resulting
in a total loss of 512 million euros in VAT revenue;
 More losses through lower revenue of income tax and social security;
 Total loss approximately 1,1 billion Euros.
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6. Financial loss resulting from cross border shopping in
Finland
 Loss of excise duty revenue: 110 million Euros
 Loss of VAT revenue: 54 million Euros
 Total direct revenue loss: 164 million Euros
 Figures for legal purchases!
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7. Other consequences of cross border shopping
 In the Nordics 2,590 less beer-related jobs in the retail sector;
 In Finland: 610 less jobs in retail;
 But: retail is not the only sector affected by cross border shopping; Also
in the brewing sector itself and its suppliers jobs are lost;
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8. Increase of excise duties do not lead to more government
revenue
 Although in most countries where excise duty rates have been increased excise duty
revenue has increased with it, negative impact on employment associated with it an
increase in excise duty significantly affect government revenue from income tax and
social security contributions;
 Increases in excise duty do not result in a proportionate increase in the total beer-
generated government revenues. In 8 of the 17 countries where an excise increase took
place, total beer-generated government revenues even decreased;
 Increases in excise duty result in a reduction of beer-generated employment. In 15 of
the 17 counties that increased the excise duty on beer, beer-generated employment
decreased;
 High excise duty rates lead to a decrease in beer sales as well as increased cross-
border sales. Both have a negative impact on employment and government revenues.
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9. Changes in total beer-generated government revenues in those EU Member States (plus
Norway) where the excise duty on beer increased (2008-2012)
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10. Thank you