At the height of the financial crisis, Greece sought to improve its finances through several large increases in excise tax on spirit drinks.Tax was hiked on 4 occasions in 2009 and 2010, increasing the rate by a massive 125% in a very short space of time. Predictably, the legitimate spirits market collapsed. It has yet to recover. Legal sales are less than half their 2008 level; excise revenues are lower in real terms than in 2009. Again predictably, a huge black market has been created. The problem has been created by excise policy and we have repeatedly called for a reversal of the policy in an effort to drive out illegal sales and move consumers back into legitimate sales channels. As yet, regrettably, no action has been taken.
We are therefore perplexed at the recent announcement that there will be excise tax cuts on wine because the application of tax in that sector has given rise to illicit activity. We laud the effort to remove illegal behaviour but there is a far greater problem of illicit activity in the spirit sector. If the solution to illicit activity in wine is to cut tax rates, why is that same principle not being applied in the spirits sector?
