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	Scotch Producers Push Euro Linkage
		Scotch Whisky producers are urging the European Commissioner in charge of the single market to tackle worsening tax discrimination faced in the EU by spirits, by introducing a system of cash linkage between different drinks taxes, so that spirits rates cannot be raised without other taxes going up too.
		The Scotch Whisky Association has published a paper, ‘EU Tax on Alcoholic Drinks - The Case for Linkage Between Existing Rates’, which points out that in every member state the alcohol in spirits is taxed more heavily than the same amount of alcohol served as beer or wine. A cash link mechanism would stop this discrimination from widening, which occurs even when the tax rises by the same percentage for all categories of drink.
		The Single Market Commissioner, Mario Monti, is also responsible for indirect taxation, including excise duties. Scotch producers believe his joint portfolio should provide an ideal position from which to introduce reform, and to secure a true single market for alcoholic drinks.
		The Commission’s own research supports the industry case for linkage. In 1994, a Commission study of ‘Competition between the Different Categories of Alcoholic Drinks’ demonstrated that all alcoholic drinks compete with each other, that market share is affected by price, and price is affected by discriminatory taxation, distorting the market against spirits.
		Since then, the position has worsened, with several Southern states substantially increasing the tax on spirits while continuing to levy no tax on wine. Twice in 1996 the tax on spirits rose in Greece, by 46 per and 25 per cent. In Spain, spirits tax went up 26 per cent. Italy, Portugal (twice) and France also pushed up spirits rates substantially.
		Hugh Morison, Director General of The Scotch Whisky Association, said: "The European spirits industry is of vital importance to the EU’s balance of trade. It generates overseas earnings of ECU 4 billion, twice that of wine, making spirits one of the EU’s top ten export industries.
		"It is scandalous, when the EU does so much to fight discrimination against spirits in overseas markets, that such an important industry is hindered by on-going discrimination within the EU.
		"A genuine single market will only arise when all alcoholic drinks are taxed at the same rate, according to their alcohol content. Until then the Commission should ensure that the alcoholic drinks market is not distorted further by introducing a system of cash linkage between existing actual rates of excise duties, thus stopping existing discrimination against spirits from becoming worse."
		Scotch Whisky producers take hope from the Commission’s Action Plan for a Single Market, published this year, which stressed the need for ‘measures designed to eliminate significant distortions in the area of indirect tax legislation’.
		They see a parallel between the tax system on spirits, and that for energy products on which the Commission stated: ‘There is a proliferation of national taxes which, because they differ widely in application, in the way in which they are calculated or in the rates, undermine the unity of the single market. Lack of harmonisation between member states for the same fuels causes distortions in the market, and affects the choices of consumers and firms’.
		This, says Mr Morison, mirrors the distortion of the alcoholic drinks market, where spirits carry a higher tax burden in every state, and seven countries do not tax wine at all.
		"This discrimination is encouraged by the present system of minimum excise duties established by the Commission in 1992, which set a zero rate of tax on wine, a low rate on beer and a high rate on spirits."
		Actual rates are often higher than the minimum, with the Scotch Whisky drinker in Sweden paying ten times more tax on his drink that the Scotch drinker in Italy.

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