Indirect taxation in 2013: excise duties are on the rise again

March 19, 2013

The percentage of government revenues received from excise duties has seen a constant decline over recent years (Figure 1). However, this development has now slowed down and we might see a turn in the opposite direction as excise rates are rising and new duties are being introduced.

In Europe, in particular, all three important groups of “classic” excise duties (alcohol, tobacco and mineral oils) have seen significant increases, with the only decrease in fuel excise duties implemented in Slovenia in 2012.

This year, excise duties on tobacco and/ or alcohol have increased or will soon increase in most EU countries, Guernsey, Moldova, Norway and Switzerland. This trend can also be seen in other parts of the world; in Africa higher excise duties are being imposed on these items, e.g., in Benin, Gambia and Zimbabwe. In the Americas, Aruba, Canada, Costa Rica and Mexico have also raised taxes on alcohol or tobacco, as have Fiji, New Zealand and the Philippines in Asia-Pacific.

Influencing consumers

While the main purpose for excise duty rate increases — and the original reason for the introduction of excise duties — is to raise revenue, these taxes are also increasingly being used to discourage consumption of certain products considered to be harmful, thus influencing consumer behavior in a number of areas.

A relatively new trend is the introduction of excise taxes on health-related products (other than alcoholic beverages and tobacco products) such as snack taxes on “unhealthy” food. For example, Benin, Costa Rica, Norway and the Philippines have all increased excise duties on soft drinks, Finland has introduced an excise duty on sweets and ice cream, and in France a specific contribution has been introduced on suppliers of beverages (sodas) with added sugar or sweeteners.

Over the last decade, environmental issues have also played an increasing role in determining the nature and application of taxes, e.g., on road fuel, motor vehicles and CO2 emissions. This type of measure includes tackling issues such as waste disposal, water pollution and air emissions.

With support from the OECD, whose analysis seems to confirm the advantages of environmental taxes, 2 many countries are introducing or increasing such taxes? For example, Germany has introduced a tax on nuclear fuel, Austria and Germany have introduced a duty on airline tickets for airplanes leaving from domestic airports, Ireland has introduced a tax on CO2 emissions and South Africa is currently working on a framework for a carbon tax for which legislation is expected in the latter half of 2013.

Taxing financial transactions

Finally, there is a noticeable trend toward increasing the tax burden on financial transactions. Although there seems to be a common and widespread belief among countries that the financial sector should contribute its fair share in remedying the damage arising from the financial crisis, there is no common approach as to how this should be achieved.

Some countries have increased supervision of the industry and tightened regulations. However, in Europe, in particular, the preferred approach has been to levy taxes on financial transactions.

France introduced a financial transactions tax in August 2012, and on 1 January 2013, Hungary introduced a tax of 0.1% on the amount involved in any payment service. Italy will follow in March 2013 with a tax on the transfer of shares and derivatives and high-frequency trading.

In addition, 11 EU member states have agreed to introduce a common transaction tax on the exchange of shares and bonds and on derivative contracts, which could be introduced as early as 2014.

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