6. To which products are excises applied and why? Exemptions from tax pay.
Tobacco (legal drugs), alcohol and gasoline (diesel and other fuels) – pollute environment.
Money used for the transportation infrastructure. Gambling licenses are subject to excise in
many countries today. Prostitution in the Canadian Parliament (2005), and in the Nevada
Legislature (2009). Some countries - Salt, paper and coffee. Electronics (microwaves, air
conditioner). Perfumes, fur clothing, crystals and other precious metals.
Electricity
7. How do they influence the prices and the demand and supply curve?
Products that somehow harm the population. Excises are applied to products with relatively inelastic
demand. Reversed proportional in respect with the elasticity.
Increase of excise duty leads to an increase in price. At the same time, people are not willing to buy
less of that product.
8. How the quantum of the excise duty defines the type of consumption policy of the country?
High taxation is aimed to discourage certain immoral activities and reduce consumption of that
products as they usually pollute the environment. At the same time – they increase the public budget
as people are not willing to give up that products. Nordic countries tax a lot alcoholic drinks,
southern countries less.
9. Do increasing taxes increase or decrease the companies' revenues?
Usually increase it. Suprataxation leads to inflation around the world.
10. How to calculate an excise tax?
In Romania> for beer: fixed amount/unit * alcohol degrees * units
For sparkling wines> fixed amount/ unit * units
A fixed amount of money per unit or a percentage.
Criticism
Excise sometimes doubles up with other taxes, and in particular with customs duties (except,
for duty-free items). If a good is purchased in one country and later exported to another, excise must
be paid when it was manufactured, and customs then paid when it enters the second country; in a
sense, the 'creation' of the good has been taxed twice, although from the second country's point of
view, it only came into existence as a taxable good at the border.
In the European Union, member states have concluded a multilateral agreement on information
exchange. This means that they will each report (to their counterparts) a list of those savers who
have claimed exemption from local taxation on grounds of not being a resident of the state where
the income arises. These savers should have declared that foreign income in their own country of
residence, so any difference is tax evasion.
3 reasons for excises>
- Increase the public budget
- Redistribute the money within society (excises on luxury objects)
- Discourage consumption for certain products
- Undo negative externalities (tax on mineral oil) BUT prophylaxis is better than treatment
- Financial means for improving infrastructure (tax on fuels – better roads)
- Short time period> inelastic demand, increase in the level of products. Higher tax burden on
consumers
- Long time period> more elastic demand. People will give up certain products as prices will
increase dramatically
Products affected
Alcohol/Alcoholic drinks
Beer
Wine.
Other fermented drinks such as cider.
Ethyl alcohol — except when it used to manufacture other products not intended for human
consumption (if used for heating or propulsion it may be classified as an energy product).
Reduced rates and exemptions
EU rules set minimum rates of excise duty on alcohol/alcoholic drinks.
Small breweries (producing a maximum of 200,000 hl of beer per year) or distilleries (producing a
maximum of 10 hl of pure alcohol per year) can receive a reduction of up to 50% off the standard
duties.
Small wine producers making less than 1,000 hl per year can also receive reductions or
exemptions.
Excise duty does not need to be paid on homemade products not produced for commercial
purposes, except for spirits.
Reduced rates of excise duty may apply to wine and fermented drinks of 8.5% alcohol by volume
or less.
Energy products & electricity
These are taxed when used as:
motor fuel;
fuel for heating.
Energy products used as raw materials or for the purposes of chemical reduction, or in electrolytic
and metallurgical processes are out of the scope of the Directive, which means that the Member
States may or may not decide to levy a tax on such use.
The main products that are taxed are:
mineral oils;
solid fuels: coal, coke, lignite;
natural gas;
electricity;
alcohols, if they are intended for use as heating fuel or motor fuel;
animal or vegetable oils, if they are intended for use as heating fuel or motor fuel.
Reduced rates and exemptions
Obligatory tax exemptions:
Energy products and electricity used to produce electricity (but may be taxed for environmental
reasons).
Energy products supplied for use as fuel for the purpose of air navigation, except when used for
private pleasure-flying.
Energy products supplied for use as fuel for the purposes of navigation within Community waters,
except when used for private pleasure craft.
Optional tax exemptions or reductions below the EU minimum tax levels:
'Green' Electricity.
Electricity, natural gas, coal and solid fuels consumed by households.
Biofuels (certain rules need to be respected).
Optional tax differentiations above the EU minimum tax levels:
Public transport.
Ambulances.
Commercial use of gas oil (big trucks).
Tobacco products
The EU legislation on excise duties for manufactured tobacco defines the following excisable
categories:
Cigarettes.
Cigars.
Cigarillos.
Smoking tobacco (such as fine cut rolling tobacco).
The EU legislation lays down the principles of taxation and sets the minimum rates to be applied.
Other exemptions
Excise goods are generally exempt from the duty when they are used:
in diplomatic or consular relations;
by the armed forces of any NATO member;
by international organizations.
When excise products are shipped for these purposes, they must be accompanied by an exemption
certificate.
EU countries can also exempt excise goods from excise duty when they are sold:
in tax-free shops and are carried in the traveler’s personal luggage to a non EU country or to an
EU territory not subject to the EU wide excise rules;
On board an airplane or ship during a flight or sea crossing to or from a non EU country or to or
from an EU territory not subject to the EU wide excise rules.