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Beer Lovers Fear an Unequal Tax Bite in Wine Country

Simon Thillou likes to think of La Cave à Bulles, his shop here devoted only to beer, as a place where beer lovers can gather to taste new brews and, of course, discuss the state of the world. But this was one controversy he never saw coming, and wishes he never had: a proposed 160 percent increase in the tax on beer.

Jack Andersen | FoodPix | Getty Images

"The increase is brutal; 160 percent is a lot," said Mr. Thillou, 36, who prides himself on promoting French microbreweries. On a barrel near the entrance, a pile of fliers that say " 160 percent taxes on beer: Who is going to pay the price?" shows what he thinks of the government's latest plan for raising revenue.

It is not just the tax increase — which would raise prices by 25 to 40 cents per bottle — that has him upset. "I am shocked that beer is the only target," he said. "I am shocked that other alcohol producers aren't affected."

Winemakers come in for particular criticism. "Wine growers aren't behind the nation, but the nation is behind them," he said.

Complaints about the tax increase are coming not just from customers, but from brewers, the food industry generally and politicians, who know that some voters, at least, like French ales. They say the government's public health arguments are an excuse to single out beer, instead of spreading the pain across all alcoholic drinks.

"If we want to keep industries and economic sectors, we can't do any old thing," said Bernard Gérard, a center-right politician in the National Assembly, Parliament's lower house. "Increasing excise duties by 160 percent seems completely unreasonable to me."

Having promised to reduce France's budget deficit, the new Socialist government has proposed about $30 billion in new taxes. The increase in the beer tax is expected to generate an additional $625 million.

The social security budget, which is in the final stages of the legislative process, also includes heavier taxes on tobacco and new ones on energy drinks.

According to government estimates, the higher tax will increase the price of a half-pint of ordinary beer by approximately 6 cents. (A half-pint of an average beer at a bar costs about 2.60 euros or $3.40.) But brewery and food industry lobbies say the increase will be considerably more because of a multiplier effect as each step of the distribution chain recalculates its profit margins, reaching 25 cents to 60 cents for the final customer.

The lobbyists fear that consumption will drop, pulling down production and threatening jobs and investment, especially for small breweries that do not have the international flexibility of European giants like Heineken or Anheuser-Busch InBev .

The French beer industry represents two billion euros in sales, or about $2.6 billion, and more than 71,000 jobs, according to the Brewers of France, a lobby that represents 80 percent of the industry. It says that 70 percent of the beer consumed in France is brewed domestically.

Laurent Lutse, president of the cafe, bar and nightclub branch of France's main food and hotel union, said that beer represents 25 percent of sales in 80,000 member companies and worried that a tax increase would accelerate the decline of such establishments. "In France in 1960 there were still 200,000 bistros," Mr. Lutse said. "There are fewer than 35,000 left, which means there are fewer bistros than there are church towers."

Despite the complaints, the tax increase is expected to pass in the Socialist-dominated National Assembly.

Many opponents of the bill suggested that wine was exempted because the industry has greater political clout, given that it is one of the country's top three exporters and employs 250,000 people. Wine is currently taxed around the same rate as beer, per hectoliter, but unlike the rates for beer, its rates do not increase with the degrees of alcohol.

The government also offers a public health rationale for the beer tax. There has been an "excessive alcoholization, in particular of youth, with beer more than with wine," said Jérôme Cahuzac, the budget minister. French beer taxes are among the lowest in the 27-state European Union, he noted, and the scheduled increase would leave them only the 10th highest, lower than in Britain, Spain and the Netherlands.

This argument does not sit well with the opposition. "Our attitude shouldn't be to try and catch up with countries that have higher taxes," said Véronique Louwagie, a center-right assembly member from Normandy.

Pascal Chevremont, director general of the Brewers of France, took exception with the government's contentions about public health. "In France we drink 30 liters of beer per year per inhabitant, whereas in Germany that number is 100 liters and in the United Kingdom or Belgium it is 90 liters," Mr. Chevremont said.

Even Gérard Bapt, a Socialist legislator who argued for the bill, conceded that the health argument was weak. "Quite frankly, I think the increase would have to be much more significant to have a real moderating effect on consumption," Mr. Bapt said.

For bartenders and restaurant workers, already resigned to the decline of France's vaunted cafe culture, the tax increase is particularly unwelcome in the current economic climate. "It isn't the way it used to be; it is becoming hard," said Mustapha Mellah, 40, who manages the Restaurant du Palais in the Fifth Arrondissement. "Right now it is best not to burden the client too much because he doesn't have a penny."

The Socialists have also said they will increase the value-added tax in much of the food industry, including restaurant meals, to 10 percent from 7 percent, partly reversing a reduction made by the previous center-right government.

Two dozen French actors, chefs and writers sent President François Hollande a petition denouncing the beer tax increase as a "morality tax" on one of the few pleasures still affordable for many people. They asked: "After beer, which other 'little weakness' will have to pay tribute to 'morality'? Will we surtax chocolate? Encounters? Or, quite simply, pleasure?"

Not everyone is so despondent. After punching the numbers on his smartphone, Joël Charvier, 37, the manager and bartender at the Bière Academy in Paris was optimistic. "I don't think it will be visible," Mr. Charvier said.

Philippe Lessevre, 26, who had come for a beer, said higher prices would not change his drinking. "It will affect my wallet," Mr. Lessevre allowed, "but not my consumption."

But Mr. Charvier was still skeptical about the government's professed concerns for public health. "It's the same as for cigarettes: If a percentage of the price goes into their pocket, they still need people to continue buying," he said. "It's hypocritical."