April 9, 2019

Is VAT the reason beer prices diverge so widely across Europe?

To buy a beer in Europe you may pay less than one EURO for a half-liter bottle of local beer in the Czech Republic to over EUR 7.00 in Norway. There are obvious reasons beer prices can differ among European countries. One is that tax laws are not uniform. Value added tax (VAT) varies from country to country.

In addition, the duty amount reflects a wide range of attitudes towards beer in the EU — for example the acceptance and love for craft brewers in Germany and the Czech Republic (where beer is considered a national drink) to the considerably stricter views in the Nordic countries (especially toward strong beers).

However, with that said pretax prices also vary widely due to consumption habits and different wealth levels in the EU from country to country. Researchers who study beer price differences report that price is negatively correlated with a country’s level of consumption and positively correlated with the per capita income.

Actually, prices on all consumer goods range widely across the EU. According to research price levels of household consumer goods in 2017 differed from 70% of the EU average in Bulgaria to 127% in Denmark. The variance is higher this year than in 2008, even though income levels across the EU have continued to converge over the years.

According to recent surveys, rising prices are one of the most pressing issues facing the EU. Creating an even playing field for businesses and thereby driving down prices is an EU function that could use more attention in the next few years. That way beer could get cheaper everywhere, or at least we would hope so.

Simply put:
Beer is more expensive in richer countries
Beer is cheaper in countries where consumption is higher
So in a wealthy country that drinks less beer, a bottle of beer will cost you more.
VAT is not (entirely) to blame.

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