Decision 2020/1791 - Authorisation of France to apply a reduced rate of certain indirect taxes on ‘traditional’ rum produced in Guadeloupe, French Guiana, Martinique and Réunion - Main contents

EN

Official Journal of the European Union

L 402/7

Council Decision No 189/2014/EU (2) authorises France to apply to ‘traditional’ rum produced in Guadeloupe, French Guiana, Martinique and Réunion, and sold on the French mainland a reduced rate of excise duty which may be lower than the minimum rate of excise duty set by Council Directive 92/84/EEC (3) but not more than 50 % lower than the standard national excise duty on alcohol. The reduction in excise duty is limited to an annual quota of 144 000 hectolitres of pure alcohol. That authorisation expires on 31 December 2020.

On 18 October 2019, the French authorities asked the Commission to submit a proposal for a Council Decision extending the time limit of the authorisation set out in Decision No 189/2014/EU, with a higher quota for another seven-year period, from 1 January 2021 until 31 December 2027.

Given the small scale of the local market, the distilleries of the four outermost regions covered by that authorisation can only develop their activities if they have sufficient access to the market in the French mainland, which is the main outlet for their rum (65 % of rum). The difficulty for ‘traditional’ rum to compete on the Union market is attributable to two parameters: higher production costs and higher taxes per bottle as ‘traditional’ rum is typically marketed at higher levels of alcohol strength and in bigger bottles.

Production costs of the cane-sugar-rum value chain in the four outermost regions are higher than in other regions of the world. In particular, the remoteness, difficult topography and climate of those four outermost regions significantly impact the cost of ingredients and production. In addition, labour costs are higher than those in neighbouring countries as French social legislation is applicable in Guadeloupe, French Guiana, Martinique and Réunion. Those outermost regions are also subject to Union environment and safety standards, which entail important investments and costs which are not directly related to productivity, even if part of those investments is co-financed by Union structural funds. Furthermore, distilleries of those outermost regions are smaller than distilleries of international groups. This generates higher production costs per unit of output.

‘Traditional’ rum sold on the French mainland is typically marketed in bigger bottles (36 % of rum is sold in bottles containing 1 litre) and at higher levels of alcohol (ranging from 40° to 59°) than competing rum-based products, which are typically marketed in bottles of 0,7 litre at 37,5°. The higher levels of alcohol content trigger in turn higher excise duties, a higher ‘cotisation sur les boissons alcooliques’ (also known as ‘vignette sécurité sociale’) (VSS) and, in addition, a higher value added tax (VAT) per litre of rum sold. Thus, a reduced rate of excise duty, which is not more than 50 % lower than the standard national excise duty on alcohol, remains proportionate to the cumulative additional costs resulting from the higher production costs and higher excise duty, VSS and VAT.

The extra costs stemming from the decade-long marketing practice of selling...