Generally speaking, excisable products such as alcohol, tobacco and mineral oil move within the Union under an excise duty suspension regime. This means that no excise duty is payable on these products while they move from a tax warehouse in one member state to another with the appropriate documentation. Excise duty is paid only when the goods are released for consumption.
Council Directive 92/12/EC covers the rules governing the general arrangements of these activities. However, articles 7 to 10 of the directive set down the rules for the movement between member states of excisable products on which duty has been paid in the member state from which they were released for consumption. These articles are the subject of the Commission proposal. Essentially the rules state that products dispatched from one member state to another for commercial purposes are subject to excise duty in the member state in which the products are consumed, that is, the member state of destination. Products acquired by private individuals for their own use and transported by them are taxed in the member state in which they are acquired. Quantitative guide levels can assist in distinguishing between private and commercial movement of excise paid products.
Council Directive 92/12 provides for a review of articles 7 to 10. In this regard, the Commission issued a working paper in 2002 to provide an opportunity to catalogue problems and offer possible solutions for consideration. Based on the findings of that exercise, the Commission drew up a report and concluded that some of the provisions needed to be revised while others required clarification. This is the basis of the proposal to amend Directive 92/12.
The Commission proposal of 2 April 2004 retains the basic principle that excise duty in respect of goods moved for commercial purposes is payable in the member state of destination. However, the proposal provides for some harmonisation and simplification of procedures covering commercial movements between member states and to reform certain arrangements in this area — for example, a simplified procedure for payment in the member state of destination of the excise duty due on distance sales by vendors in one member state to private individuals in another.
In the case of goods acquired in another member state by private individuals, the proposal removes the existing stipulation that the private individual who acquires the products must also accompany them en route to the destination member state. The principle of taxation in the member state of acquisition would still apply provided that individual either transported them or arranged for their transportation — these might be termed distance purchases. The changes would not apply to tobacco products transported on behalf of a private individual. They would continue to be taxed in the member state of destination on public health grounds. The principle of taxation in the member state of acquisition for products for personal use would also apply to gifts of excisable products, including tobacco products sent from one individual to another, provided no payment was involved.
The proposal also states that quantitative guidelines, better known as the indicative limits, which apply as criteria for determining whether products are acquired for personal use or for commercial purposes, be abolished. It is argued by the Commission that any such guide levels should be a matter for the administrations of the various member states.
The following reservations were expressed when the proposal came forward for discussion at Council level. Any liberalisation of the regime for importation of duty paid products could have significant implications for domestic revenue receipts for Ireland. There would be increased opportunities for private individuals to engage in fraudulent commercial activity and, regarding public health, the proposal could lead to an increase in alcohol consumption.
On the receipts argument, excise on alcohol is an important source of tax revenue used to fund public services. This is not a view necessarily shared by other member states with different traditions and approaches to taxing alcohol. However, such countries may source more of their tax revenue from earned income than is the case in Ireland. With regard to the potential for fraudulent commercial activity, Ireland has always taken the view that a private individual must accompany excise-paid products when returning to his or her member state. Extending this provision to allow private individuals merely to arrange for such transportation could open the door to a significant increase in private importation of alcohol products by individuals whose primary motive may be to sell on such products at a profit. In addition, there are health considerations attached to any proposal likely to lead to an increase in alcohol consumption, but this is not an excise concern as such.
We expressed our reservations on the abolition of indicative limits which are used as guidelines for customs staff in determining whether private shoppers returning home bring home quantities for personal use only. The alcohol limits are ten litres of spirits, 90 litres of wine and 110 litres of beer.
The vast majority of member states shared Ireland's reservations on the Commission proposal. The main problem for member states was the removal of the obligation for private citizens to accompany alcohol and the abolition of the indicative limits. The Nordic countries raised the possibility of reducing the limits and making them mandatory to limit cross-border shopping for alcohol, while some member states wanted the limits on tobacco products, in particular cigarettes, to be halved. However, the Commission was opposed to member states' suggestions in this area, noting that indicative limits should only be used as mere guidelines.
The indicative limits issue is a major one for some countries. For example, the UK has been reprimanded for what the Commission has seen as tough action on shoppers returning from continental Europe, primarily on short ferry trips. The UK suspects that a number of shoppers are taking multiple trips and reselling quantities.
In light of the negative response from member states, the Commission has withdrawn the key elements associated with the proposal, namely, that alcohol need not be accompanied when imported by a private citizen and the abolition of the indicative limits. The proposal primarily centres on simplification and harmonisation of procedures relating to commercial operations. These would include the introduction of central offices in each member state that would allow registration and guarantee lodgement and payment facilities for traders engaged in these commercial activities. However, these in themselves have proved to be problematic in discussions. Some member states are not convinced of the need for change in this area. Doubts were expressed that the solutions being put forward would reduce the administrative burden on traders. However, there is scope for some progress in this area.
The proposal was last discussed in January, when the Council meeting concluded with the Luxembourg Presidency stating that it would return to the Council with a revised text which would attempt to take on board the views of member states. The issue of reducing the indicative limits put forward by some member states obviously does not sit comfortably with the Commission which regards such a move as a retrograde step. In light of this, it is possible the Commission may withdraw the proposal completely. I will be happy to answer members' questions.