One in four bottles of liquor is counterfeit

Bathtub gin and rum runners may have found a new incarnation in the Czech Republic, according to authorities who report the government loses billions of crowns in taxes each year due to counterfeit alcohol. But distillers and authorities alike seemed resigned to the pervasive black market.

According to the Union of the Czech Spirits Producers, approximately one in four of the millions of bottles of alcohol sold annually in the country is counterfeit. Vladimír Steiner, chairman of the Union of the Czech Spirits Producers, told The Prague Post the counterfeiting usually involves cheap, generic types of alcohol like vodka and Czech rum.

"Counterfeit producers either make alcohol by using additives to extract chemicals from denatured alcohol or import it illegally, from Poland, we suspect," Steiner said.

Denatured alcohol is tax-exempt - making it a cheap core ingredient for counterfeiters. It is also poisonous, meaning chemicals must be added to it to make it drinkable. According to Lucie Siřišťová of the Institute of Chemical Technology in Prague, butanone, or methyl ethyl ketone, is a chemical commonly used in counterfeiting.

Vodka labelled with a well-known brand name was analyzed in the study, and "a trace of methyl ethyl ketone was found, the vodka was produced from denatured alcohol,"  Siřišťová said.

The Czech Republic, like all EU countries, requires a tax stamp from the customs authority to be carried on every bottle of alcohol sold. Counterfeiters are able to circumvent this by selling the spirits to venues that are willing to buy the cheaper, if illegal, liquor and thus create a thriving market for the product, Steiner said.

"Most illegally produced alcohol doesn't get into the stores, but rather to pubs, clubs and restaurants," he said.

Drinkers making purchases at normal shops are unlikely to encounter illegally produced alcohol, but customers buying mixed drinks at less reputable nightclubs, or bottles of alcohol at small markets, are liable to encounter counterfeit alcohol, which is sold either without tax labels or with fake ones. Steiner acknowledged the severity of the situation but said his union does not have the authority to enforce the law.

"We cannot solve this situation. It is the responsibility of the customs officers, the police and the Czech Agriculture and Food Inspection Authority," he said.

The Czech Agriculture and Food Inspection Authority (CAFIA) carries out about 2,000 inspections of alcoholic beverages each year to "reveal the botanic origin of the spirits, the possible presence of contaminating substances or to determine whether the alcoholcontent is in compliance with the information given on the labeling," said Martina Šmídtová, CAFIA spokeswoman.

"Of course, foreign chemicals must not be present in foodstuffs in any amount," and thus the remnants of denatured alcohol cannot be present in any alcohol, she said.

But Šmídtová could not recall any recent case of alcohol contaminated with foreign chemicals and said the issue of counterfeit alcohol is outside CAFIA's jurisdiction.

"CAFIA does not address the investigation of cases of illegal trafficking," she added.

According to police records, seven people were charged for tax evasion for manipulating tax stamps involved in the distribution of Czech rum, vodka, apricot brandy and peppermint liquor in 2009. The police estimate this one operation accounted for 32.5 million Kč in damages.

"The producer is always responsible for the authenticity of the alcohol," said police spokeswoman Pavla Kopecká. "The police have investigated cases of illegal production of alcohol and have several ongoing proceedings. There is not a definite answer to where this alcohol comes from. The base of its production is grain alcohol, which can be bought everywhere."

The Customs Authority did not respond to several phone calls requesting information.

The average Czech consumes about 5 liters of spirits - nearly 25 percent of the per-capita alcohol consumption - per year, according to the World Health Organization. The Czech Republic's 2010 budget increased the excise tax on hard alcohol to 24,000 Kč per 100 liters.

Such figures add up to a huge market for counterfeiters, devastating losses for the government on untaxed alcohol and cuts in profits for legitimate distillers. Some alcohol producers have been vocal about the necessity of greater government regulation and customer care in the sale and purchase of alcohol.

"The inspection of alcohol bottles on sale must be increased, as they can easily disclose any counterfeit products," Anthony Schofield, CEO of Jan Becher, producer of Becherovka, told The Prague Post. "Only stricter regulation can enforce the law. Otherwise, there will be no quality products on the market and no taxes for the state."

But such stern calls for action are rare, as most authorities feel counterfeit alcohol is a fact of life.

"Counterfeiting happens everywhere in the world," Steiner said. "It's human nature: Where money can be obtained - even if it is done illegally - people will find a way to get rich."

- Klára Jiřičná contributed to this report.

Stephan Delbos can be reached at
sdelbos@praguepost.com