Unlike in Slovenia, high excise duties are destroying Croatian small-scale brandy industry.
In order to enable better competitiveness of small producers of beer, wine and spirits, the Slovenian government in early August significantly lowered excise duties and enabled a simpler procedure for exports, reports Glas Slavonije on August 29, 2016.
Unfortunately, situation in Croatia is something completely different. Excessive excise duties have led to a situation in which registered producers of fruit brandies and liqueurs, who pay excise duty and VAT on their products, have been brought into a very uncomfortable position, while on the other hand gray market is flourishing. In other words, the mess in the market could be avoided with lower excise duties and stricter inspections.
The Law on Excise Duties considers “small producers of strong alcoholic beverages” to be persons who produce alcoholic beverages for their own use, under 20 litres of pure alcohol per year per household. Any such person is obliged to register as an excise duty payer. They pay excise duty in the amount of between 100 and 200 kuna. If the total production for their own consumption exceeds 20 litres of pure alcohol pet year, producers have to pay 53 kuna per litre of pure alcohol, for all quantities above 20 litres of pure alcohol.
When a manufacturer who wants to sell its products adds the VAT, the price for a litre of fruit brandy cannot be lower than 100 kuna. On the other hand, those who produce brandy illegally sell it for 35 or 40 kuna. Obviously, registered and legal producers simply cannot be competitive, and that is the reason why registered producers of fruit brandies and liqueurs in Slavonia and Baranja, which is an area with a long tradition of brandy production, are few and far between, particularly when compared with the number of illegal producers.
Davorin Škoflek, vice president of the Association of Fruit Brandies Producers, said that people do not engage in larger-scale production of spirits because the production is so expensive. Škoflek said that the state had categorized small producers together with the large ones, who can afford to pay high excise duties. He cited the example that he, immediately after producing about a dozen litres of brandy, has to pay the state 200 kuna, regardless of whether the brandy will ever be sold.
According to the Customs Administration, in Croatia there are 41,653 registered small producers of strong alcoholic beverages. Most of them are registered in Slavonia and Baranja – 16,651. “In 2015, about five million kuna of excise duties have been paid by small producers. We have issued more than 1,100 misdemeanour warrants and more than 300,000 kuna were paid in penalties”, said the Customs Administration.
