Alcoholic beverage excise tax stamp system in need of major reform

10/ 04/ 2019

The European Business Association stresses the need to abolish the excise tax on wines, where the stamp itself costs 19 times more than the excise tax rate. Thus, according to Ukrainian legislation, all beverages containing ethyl alcohol of more than 8.5% of volume units fall under the category of alcoholic beverages to which the stamp has to be applied. At the same time, on the issue of excise duty in business, there is a question regarding wine products, which specifies the excise not even in pennies, but in tenths of a share. The reason for this is the rate of excise duty on some wines. After all, according to the Tax Code (Article 215), non-sparkling wines, grape must, etc. whose strength exceeds 1.2% but no more than 15% is taxed at the rate of 0.01 UAH per liter. At the same time, the price of the stamp itself is 0.19 UAH per 1 pc. However, besides the cost of producing the stamp, for example, importers of alcoholic beverages bear the costs of sending stamps abroad to be applied to bottles, as well as the direct imposition of the brand. Thus, according to the calculations of the member companies of the Association, 1 UAH of the paid excise tax accounted for 278.6 UAH of additional business expenses. Moreover, the main part does not come to the budget of Ukraine, but remains abroad. However, in accordance with Regulation 110/2008 of the European Parliament and the Council on the labeling and protection of names of places of origin of alcoholic beverages to be adopted by the Ukrainian side, beverages, under the codes UKTZED 2203 (beer from malt), 2204 (wine grapes, etc.), 2205 (vermouth, etc.) ), 2206 (cider, etc.) and 2207 (ethyl alcohol, undenatured, with an alcohol concentration of 80% or more, etc.) are not considered alcoholic beverages. Consequently, on the territory of Ukraine, control over the quality of such products should take place not by means of the presence of the excise tax mark, but by the State Committee for Proprietary Service and the State Fiscal Service in accordance with the general legislation on product safety. In addition, it is necessary to pay attention to the fact that today, excise taxes are not tradable, with products containing alcohol up to 8.5% (since the excise tax is not applied to this product). And, at the same time, control of the safety of such products is carried out. Therefore, it is quite reasonable to introduce the same logic for the products specified in Art. 215 of the Tax Code, that is, strength of 1.2% but not more than 15%. In order for a transparent business, which is paying all relevant taxes, to not bear any logical tax burden, which, moreover, is not in the interests of the state budget and consumers. The business community stresses the need to abolish the excise tax stamp on wines, where the price of the brand itself is 19 times higher than the excise tax rate. To do this, it is needed to make changes to the Tax Code (art.226). The relevant business proposals have already been provided by the Government. Hopefully, they will be taken into account in the near future.

The European Business Association stresses the need to abolish the excise tax on wines, where the stamp itself costs 19 times more than the excise tax rate.

Thus, according to Ukrainian legislation, all beverages containing ethyl alcohol of more than 8.5% of volume units fall under the category of alcoholic beverages to which the stamp has to be applied.

At the same time, on the issue of excise duty in business, there is a question regarding wine products, which specifies the excise not even in pennies, but in tenths of a share. The reason for this is the rate of excise duty on some wines. After all, according to the Tax Code (Article 215), non-sparkling wines, grape must, etc. whose strength exceeds 1.2% but no more than 15% is taxed at the rate of 0.01 UAH per liter.

At the same time, the price of the stamp itself is 0.19 UAH per 1 pc. However, besides the cost of producing the stamp, for example, importers of alcoholic beverages bear the costs of sending stamps abroad to be applied to bottles, as well as the direct imposition of the brand. Thus, according to the calculations of the member companies of the Association, 1 UAH of the paid excise tax accounted for 278.6 UAH of additional business expenses. Moreover, the main part does not come to the budget of Ukraine, but remains abroad.

However, in accordance with Regulation 110/2008 of the European Parliament and the Council on the labeling and protection of names of places of origin of alcoholic beverages to be adopted by the Ukrainian side, beverages, under the codes UKTZED 2203 (beer from malt), 2204 (wine grapes, etc.), 2205 (vermouth, etc.) ), 2206 (cider, etc.) and 2207 (ethyl alcohol, undenatured, with an alcohol concentration of 80% or more, etc.) are not considered alcoholic beverages. Consequently, on the territory of Ukraine, control over the quality of such products should take place not by means of the presence of the excise tax mark, but by the State Committee for Proprietary Service and the State Fiscal Service in accordance with the general legislation on product safety.

In addition, it is necessary to pay attention to the fact that today, excise taxes are not tradable, with products containing alcohol up to 8.5% (since the excise tax is not applied to this product). And, at the same time, control of the safety of such products is carried out. Therefore, it is quite reasonable to introduce the same logic for the products specified in Art. 215 of the Tax Code, that is, strength of 1.2% but not more than 15%. In order for a transparent business, which is paying all relevant taxes, to not bear any logical tax burden, which, moreover, is not in the interests of the state budget and consumers.

The business community stresses the need to abolish the excise tax stamp on wines, where the price of the brand itself is 19 times higher than the excise tax rate. To do this, it is needed to make changes to the Tax Code (art.226). The relevant business proposals have already been provided by the Government. Hopefully, they will be taken into account in the near future.