A recent decision in France has concluded a government tax on energy drinks contravenes the country’s constitution.
Under France’s tax laws a tax was imposed on energy drinks with at least 220 mg of caffeine per 1,000 ml.
The tax was challenged and the Constitutional Council was asked to rule.
The Council gave its decision on 19 September.
In its decision the Council indicates the goal of improving public health was the policy foundation for the tax and concludes it is acceptable, in pursuing that goal, to distinguish between drinks based on caffeine content.
However, in this case, some drinks which had higher caffeine levels than 220 mg per 1,000 ml were exempt from the tax because they weren’t “energy drinks”. This was a problem according to the Council because in effect drinks that were substantially the same in terms of caffeine content were not treated equally for tax purposes and this differential treatment was not justified.
Therefore, the Council ruled the tax is contrary to France’s Constitution.
The lesson for tax policy makers – it’s not what you do, it’s how you do it. The problem was created because caffeine was used as the determinant for imposing the tax. If a characteristic unique to “energy drinks” had been used instead then it’s possible a different outcome might have been reached.
Barrister, Director and Consultant specialising in tax, family enterprise governance and succession, helping start ups and entrepreneurial enterprises grow safely and international expert on value added tax policy and implementation.