Alcohol distillery – illustrative photo.
Prague – In the Czech Republic, six million liters of spirits are illegally produced and consumed in a year, which is roughly the same volume as the entire domestic production. This was stated in a press release by the Union of Producers and Importers of Spirits (UVDL), which brings together the largest producers of spirits in the Czech Republic. The Union also rejects the consumption tax hike planned by the government as part of its public finance consolidation package.
The president of the union, Pavel Dvořáček, said that the state's pressure to increase consumption tax will only increase the demand for cheap untaxed alcohol, and the state will not collect more money in taxes. The Union estimates the consumption of untaxed and illegally sold alcohol according to the amount of spirits produced in grower distilleries.
“It is a big paradox. Previously, the production and sale of spirits without a license was a criminal offense. Today, you will not go to jail for illegal production. You will be punished for tax evasion at most,” said Dvořáček. According to the union, spirits account for 65 percent of consumption tax collection, and last year distilleries collected over nine billion CZK. It states that spirits account for about 29 percent of alcohol consumption in the Czech Republic.
According to the government's plan, next year the excise tax on spirits will rise by approximately 32 crowns per liter of ethanol, which is a ten percent increase from the current rate of 322 CZK 50 per liter. Excise duty on 0.5 liters of 40 percent rum or vodka is CZK 64.50. In the following years until 2028, it should grow by five percent per year.
Dvořáček considers the government's plan to increase the tax on spirits while keeping the consumption tax on still wines at zero to be unfair. “If today a customer buys a pint of 40 percent spirit for 150 kroner, we will pay almost one hundred kroner to the state for consumption tax and VAT. For a seven-pack of wine, it's just over 30 kroner. And that's before VAT. That's absurd,” he said.
According to him, the Union would consider it ideal if a gram of alcohol was taxed at the same amount. It would bring the state roughly 20 billion crowns a year, he said.
Dvořáček drew attention to the fact that spirits producers had to accept a number of restrictive measures after the so-called methanol affair, which were very costly for them. “Then came 2020 and a jump in consumption tax by 13.5 percent. And I emphasize only on spirits,” he added.
Compared to neighboring countries, the Czech Republic currently has lower alcohol taxation than Poland and Slovakia, and it is thus at the level of Germany, states the government material for the consolidation package, which is now in the interdepartmental comment procedure.