IOBE: The alcoholic beverages sector in 2021 contributed €1.75 billion to the GDP

The effects of the continuous and prolonged crises experienced by the Greek economy after 2009 on the alcoholic beverages market, as well as the potential impact of the adjustment of the tax framework applicable to alcoholic beverages, are examined in the new study of IOBE entitled “The alcoholic beverages sector in Greece: Contribution to the economy and prospects”.

The sector of production and marketing of alcoholic beverages is part of a wider sectoral system, which also includes large parts of catering and tourism (hospitality sectors). According to the IOBE study, the overall contribution of the wider supply chain of alcoholic beverages to the Greek economy is particularly important, as in 2021 it contributed €1.75 billion to the GDP and supported 61 thousand full-time jobs.

The escalation of excise duty (EFF) rates on alcoholic beverages in the period 2009-2010 led to a reduction in consumption and the substitution of part of the legal market by illegal alcoholic beverages, trends that were also reinforced by the decrease in disposable income of consumers.

The pandemic has been a new test for the supply chain of alcoholic beverages, dramatically affecting consumption – especially on-trade – due to the forced lockdowns in catering and the limitation of tourist flows. Alcohol consumption fell by 65% ​​in 2020 and recovered in 2021, but not back to pre-pandemic levels. Legal recorded sales of alcoholic beverages in 2021 were at 90% of the 2019 level and 50% compared to 2009.

According to the IOBE study, Greece has the highest rate of VAT on alcoholic beverages among the EU-27 countries (in purchasing power units) and more than twice the average of neighboring and touristically competitive countries.

High taxation has negative effects both on the domestic market, increasing incentives for illegal trade, and on the tourism product, reducing its competitiveness.

In the study, it was estimated that the total losses of tax revenue from the illegal trade in alcoholic beverages amount to approximately €60 million (non-payment of VAT and VAT), not counting the losses from the two-day distillers’ product. With regard to the distillate product of the two-day distillers, popularly known as “bulk tsipouro”, the losses from EPF are estimated at up to €90 million.

The restriction of the illegal trade in alcoholic beverages e.g. through a reduction in VAT, but also with coordinated controls, it is estimated that it will bring multiplier benefits to tax revenues, public health, the viability of many businesses and employment, strengthening the operating framework of healthy businesses.

Indicatively, the study estimated that a possible reduction of illegal trade by 20% would lead to approximately €30 million in additional tax revenue from VAT and VAT per year, while a greater reduction of it by 50% and substitution of these consumption quantities with legal alcoholic beverages, could lead to additional revenues of €70 million from VAT and VAT.

Effects of the convergence of the taxation of alcoholic beverages with the European Union average

The challenges facing the spirits industry, in addition to the high tax burden, are related to the wider economic environment, as the pandemic, energy costs and high inflation have reinforced uncertainties in the economy.

In this context, according to the IOBE study, it would be positive to support the businesses of the wider supply chain of alcoholic beverages to cope with these challenges, with the basic measure being the readjustment of the level of taxation of alcoholic beverages.

The study assessed the effect of reducing the VAT on alcoholic beverages from the current level of €2,550 per 100 lt of ethyl alcohol to €1,800 per 100 lt of ethyl alcohol (EU average). A reduction in the VAT rate can help curb the illegal trade in alcoholic beverages and replace unregistered with legal consumption, which is controlled and safe, while strengthening the legal segment of the market, creating a more robust business environment with restraint or employment enhancement.

Based on IOBE’s analysis, the convergence of the EFK with the EU average will have a positive effect on the Greek economy, leading to:

– Strengthening the GDP from €159 million to €314 million

– Increase employment throughout the alcoholic beverage supply chain from 5.5 thousand to 11.5 thousand positions

– Total revenue change (VAT, VAT, income taxes) up to €11.9 million.
In addition to the adjustment of the taxation of alcoholic beverages with its convergence towards the EU average, positive contributions to the operation of the market and the development of the alcoholic beverages sector could be made by:

– The improvement of the digital functions of the control and supervision services of alcoholic beverages with the universal application of the LOTIFY system and the creation of an electronic register of two-day distillers and distillers, with the aim of limiting illegal trade,

– The regulation of the production and distribution of spirits in bulk, through electronic monitoring of the produced spirits in bulk from production to consumption, in combination with the provision of incentives to traditional distillers for the standardization of their products,

– The support of domestically produced alcoholic beverages through the establishment of a product promotion program of geographical indications and the financing of a program of strategic entry into foreign markets, with the aim of strengthening exports and improving access to financing and information on distribution channels abroad, in particular for small and very small Greek businesses, and

– The facilitation of business investments by electronic processing of studies and submission of all the elements of an investment to an institution.