Alcohol and tobacco taxes: criteria for harmonisation

Abstract

This paper is concerned with some of the major issues of economic principle that arise in trying to construct a coherent framework for the taxation of alcoholic drinks and tobacco products. This is not, of course, the enterprise on which the European Community is currently embarked. Instead there has been frequent resort to the simple pragmatism which says that convergence should proceed ‘... by reference to the points of departure rather than to a point of arrival’ (Commission, 1980, para. 15). But this position, which attaches significance only to the process and the fact of harmonisation and none to what it is that the Community ultimately harmonises on, is clearly untenable. Nor is it consistently adopted: the discussion of routes to harmonisation is in fact heavily influenced by references to both general principles of taxation and the effects of alternative regimes on producers and consumers. The purpose here is to provide a clearer basis for the articulation of these arguments. We begin by recalling the context and nature of the principal controversies.

The authors are grateful to Piervincenzo Bondonio, Sijbren Cnossen and other conference participants for their helpful comments; remaining errors are their own.