Unrecorded Alcohol Consumption in the Netherlands: Legal, Semi-Legal and Illegal Production and Trade in Alcoholic Beverages

Article excerpt

Three sources of unrecorded alcohol consumption in the Netherlands are discussed. The first source, illegal alcohol production, pertains only to illicit distilling, which never accounted for more than 1% of the total spirits production and is currently almost non -existent. Of more importance could be the standard 1.5% of total production of distilled alcohol that goes untaxed, officially booked as production loss. Unknown is how realistic this projected loss is, and how much of this quantity is sold for domestic, yet untaxed and hence unrecorded, consumption. The second source, legitimate home production of beer and wine, is estimated not to amount to more than 1% of total beer and wine consumption. Since the establishment of a single European market

in 1992, importing and exporting of alcoholic beverages for personal use is free. No exact data on the quantity of cross-border traffic are available, but it is believed not to be substantial. Dutyfree import is also limited. Due to large differences in excise duties between the EU countries, illegal trade is a potential lucrative criminal business. There is, however, no systematic control of alcohol transported between the Netherlands and other member states, so no estimate of this can be given. All sources of unrecorded consumption summed up, it is concluded that the quantity of non-registered alcohol consumption in the Netherlands is relatively small; the validity of sales figures, as a base for per capita consumption estimates, is thus relatively high.

In the Netherlands, three sources of unrecorded alcohol consumption can logically be distinguished that may affect the estimates of total alcohol consumption based on sales: illegal spirits production, legal but unregistered homemade beer and wine production, and illegal imports. The effects of these sources result in an underestimation of annual per capita alcohol consumption based on official sales records. In this paper, an assessment is made for the Netherlands of the nature and possible impact of the sources of unrecorded alcohol consumption on the validity of per capita alcohol consumption figures based on sales data.

Illegal spirits production

Production and imports of alcohol in the Netherlands are highly regulated by law. Noncommercial home production of alcoholic beverages is allowed, but distilling remains a licensed activity, even when it is for personal use. Alcoholic beverages, along with several other goods such as soft drinks, are excisable. Before the major tax reforms that took place at the end of the 19th century, a large proportion of the budget of the central government came from excise taxes on a variety of goods (de Vrankrijker, 1969). Alcohol duties were an important source of state income. At the beginning of the 20th century, alcohol taxes contributed almost 30% of the total Dutch state budget (Gerritsen, 1993). In England and the US, by comparison, the share of alcohol taxes in the total state budget was even more, amounting to 40%. After the major tax reform at the end of the 19th century, from an indirect tax system to a modern, direct income tax, most duties were abandoned. The share of alcohol duty in the state budget dropped to less than 10% and declined further, after World War II, to the current level of about 1%. However, because the beginning of the 20th century was a time of temperance and of the fight against the "gin devil," excise on alcoholic drinks was not abandoned. Especially excise tax on distilled spirits was and is relatively high. The current, relatively high duty on distilled spirits has traditional roots, as beer became a popular drink only after the war, and wine has been relatively expensive due to import costs.

These high duties on spirits have in the past been the cause of illegal distilling. In the Netherlands, small-scale production of distilled spirits-as the "bouilleurs de cru" in France or farm production in Scandinavia-was and is virtually nonexistent. …