The damage caused by spring frosts in mid-April is truly unprecedented for a long time. This year’s fruit harvest will be about a fifth of the long-term average, many orchards will not produce a single piece of fruit. Damages, albeit somewhat less dramatic, are also being counted by winegrowers, especially those in the Czech Republic.
In such a situation, anything can be discussed. For example, about the extent to which the state should or should not save business, in which the weather is a natural part of business risk. Or about the extent to which compensation should be taken into account, whether the entrepreneur was and could be insured. Or about whether and how cultivation methods or crop selection can be adapted to climate change and more frequent weather fluctuations. Interesting and fruitful discussions can be had about all this and many other things.
On the other hand, what we shouldn’t talk about in connection with unexpected morning frosts is the tax system. It should be set according to other criteria if possible.
Nevertheless, Czech and Moravian winemakers decided to seize the opportunity by the scruff of the neck and use the natural disaster to end debates on the introduction of a non-zero excise tax on still wines. They say they don’t want financial compensation – just to forget the idea of putting alcohol in wine on an equal footing with all other spirits and imposing a non-zero consumption tax on it.
It is no surprise that winemakers use all means. It is a little surprising that the Minister of Agriculture will join their game. “With regard to the effects of catastrophic frosts on the wine sector as well, especially in the Czech Republic, I consider the ongoing debate over the introduction of an excise tax on still wines to be a gamble with the entire sector, especially small and medium-sized winemakers,” recently declared Minister of the People’s Republic Marek Výborný.
People in general perform admirable dances around the taxation of still wine. Výborný himself, who is not handicapped in the debate about wine by his South Moravian origin or his mandate, allowed the discussion of a non-zero excise tax on still wine back in April. But then the wine lobby, the Moravian voter base and, last but not least, the party leader and Hanák Marian Jurečka took over. Excellent kicked his heels and became a fierce opponent overnight. And as an excuse – with the help of the wine lobby – the April frosts served him.
And that’s really sad. There can be many criteria for setting up a tax system. These can be economic criteria, for example, the effort to collect more money for the state budget or the effort to balance the externalities caused by a certain action. These can be – as in the case of excise tax on still wine – social criteria, for example motivation for some type of behavior. But taxes should definitely not be set depending on whether it’s freezing.
The Czech Republic is a country addicted to alcohol, steeped in alcohol the most out of the entire EU. This has strong implications for public health and, through it, for the economy. To maintain zero excise duty on one type of alcoholic beverage under such circumstances is national fiscal masochism. Yes, other “wine” countries also have zero excise duty on still wine, but their average resident over the age of 15 also doesn’t pour 14.5 liters of pure alcohol over their heads every year.
And since one of the ways to reduce alcohol consumption is to increase its price, the debate about burdening still wine with a non-zero excise tax is completely legitimate. It can include various arguments about the exemption of smaller producers. It must include the argument that almost three-quarters of the wine consumed in the country is imported and that the excise tax will fall most heavily on the cheapest imported molasses, which serves as the most cost-effective way of transporting alcohol into the bloodstream.
We can introduce an excise tax on still wine rather stupidly, i.e. as suggested by the Minister of Finance Zbyněk Stanjura – simply rewrite the zero rate in the Excise Tax Act to a higher one. Or we can introduce an excise tax on still wine in a smarter way as part of a comprehensive change in the approach to alcohol taxation – for example, as suggested by experts from PAQ Research in their tax study.
But we certainly cannot start and end the debate on major tax changes with a large potential social impact depending on whether it rains or hardens in April. This would no longer be just tax masochism. Driving the debate according to the weather is already pure fiscal clowning.
