The finance ministry is shortly to look at the question of reducing the rate of excise duty on spirits. The ministry has already said that this tax may be reduced. However before this can be done the cost of smuggling needs to be calculated. The ministry does not want to reveal if it has made such an analysis. The spirits producersà organisation KRPS is a bit more forthcoming and claims that according to its calculations a thirty percent fall in excise duty on spirits would mean a loss of PLN373.3m for the treasury within six months. However this money would be recuperated in the next six months due to increased consumption of spirits where the tax had been paid. Indeed, the organisation claims, the government may be able to raise more cash.
Henryk Tomasik of the KRPS and MD of Polmos Warszawa says that he believes the state would be able to take just under PLN5.9bn in the first year following a thirty percent cut in excise duty. Over PLN4.1bn would come from excise and over PLN1bn from VAT with other revenues accounting for PLN800m. That represents an increase of PLN917m in taxation raised. No cut in excise duty is expected in the immediate future although changes in law are clearly in hand.
The KPRS believes that this cut in duty would make serious inroads into the smuggling operations of organised crime. The organisation argues that increases in excise duty have not had the desired effect and have only brought several producers to the virge of bankruptcy. MPs are clearly now aware that any more increases in excise duty on spirits will only lead to lower budget revenues for the state and more for the criminals. They are also aware that cuts in taxation today will be much harder than several years ago because smuggling and illegal production is now much more organised.
The KRPS estimates that the treasury lost some PLN2.8bn as a result of smuggling and illegal production last year. Around 35m E 36m litres of spirits are being produced illegally each year according to estimates. To put it into context, some 70.7m litres were legally sold, of which 57m litres were produced by the Polmos companies.