Tax Evasion in the Alcohol Industry Still High

The total alcohol production last year was worth one billion euros, but taxes were raised for only 400 million euros worth production. Thus the loss to the state budget amounts to 300-400 million euros.

In volumes, the alcohol production was 1.1 billion hectoliters big, but only 648,000 hectoliters were legally declared, said yesterday Dragos Frumosu, president of the National Federation of Trade Unions in the Food Industries.
"I am talking here of pure alcohol, the one made of grains, not of other alcoholic beverages. The total production was estimated after controlling various warehouses of alcohol producing companies," said Frumosu.

The trade unions representatives say that tax evasion in the alcohol industry spread wide, from companies acquiring the raw material to those selling counterfeit products. According to Frumosu, the alcohol produced on the black market makes 60% of the Romanian total production, while worldwide the black market takes only 10% to 15% of the total.

The main reasons for tax evasion are the lack of clear legislation, the poor enforcement of existing laws, and poor control of alcohol producers, trade union representatives say. This is why they ask for a minimum price to be set for the alcohol, and for the Financial Guard to make thorough investigations of producers.
"If these measures would be taken, the tax evasion in the industry could drop from 24% to 30%," said Frumosu.

"Some people in the owners’ associations, including those in Garant, the biggest one, do not want a minimum price to be set on the market. This makes one think that in fact they are [willing and] able to sell [at a profit] at prices under production costs because they are actually evading taxes," said Frumosu.

Also yesterday, representatives of the trade unions and of the Garant owners’ association met with those in the Ministry of Finance, Ministry for European Integration, and the Council for Competition.
Following the talks, the people in the alcohol industry dropped their claim for a minimum price to be set since this will not be accepted by the European Union. A reference price will be agreed upon, but this will not be mandatory. Still, informing the Finance Ministry about selling under the market price will be mandatory for Romanian producers. Last year alcohol taxes raised 5.7 billion lei for the budget, while in the first seven months of 2004 these went to 3.5 billion lei, official statistics show.