Rethinking alcohol taxation in the Czech Republic

Alcohol taxation in the Czech Republic is highly uneven across different types of alcoholic beverages. Our new report examines the economic contribution of the sector and considers how alternative approaches to excise taxation could affect government revenues and wider economic activity.

The analysis first establishes the sector’s economic contribution in 2023 – an anchor year providing a baseline before the subsequent increases in spirits excise duties. Alcoholic beverages generated around CZK 92.3bn in GVA and supported just under 95,000 FTE jobs across the Czech economy, considering both upstream manufacturing and related downstream activities.

Additionally, our report finds substantial differences in tax treatment across alcoholic beverage segments. In 2023, excise duty rates varied considerably on an ethanol-equivalent basis, while still wine remained exempt. Spirits generated 64% of alcohol excise revenues despite accounting for only 28% of total ethanol consumption.

With subsequent spirits excise tax increases in 2024–25 failing to deliver the expected revenues, the report analyses how alternative, more balanced tax structures could affect government revenues and domestic economic activity.

Key findings include:

• a limited reform, bringing beer taxation to around 28% of the spirits rate and introducing a still wine duty at around 16% of the spirits rate, could increase total tax receipts by around CZK 1.9bn;

• an intermediate reform, bringing beer and still wine taxation to around 60% of the spirits rate, could increase receipts by around CZK 11.6bn; and

• a more extensive reform, harmonising taxation across alcoholic beverage segments at 100% of the spirits rate, could increase receipts by around CZK 21.8bn.

These additional revenues need to be considered alongside the potential effects on domestic economic activity. Across the three scenarios, the analysis estimates upper-bound reductions in upstream GVA of around CZK 0.3bn–3.6bn and reductions in employment of around 200–2,700 FTE jobs.

Overall, the results suggest that broadening the tax base and reducing the large differences in taxation across alcoholic beverages could raise additional government revenue while creating a more balanced tax structure. The scale of reform nevertheless involves trade-offs between additional fiscal revenues and potential effects on domestic economic activity.

Click here to read our full report, 'The Alcoholic Beverages Sector in the Czech Republic'

A Czech-language version of the report is also available here.