Many of you will have heard about the United Kingdom’s (UK) review of alcohol taxation. When launching the review, the UK Government set out three objectives that reform should address:
a) Simplifying the current system;
b) Making the basis of alcohol taxation more economically rational, with fewer distortions and arbitrary distinctions; and
c) Reducing the administrative burden on producers when paying duty and complying with excise requirements.
The Chancellor then announced a proposed new system on Budget Day, 27 October 2021, which would see all categories of alcohol taxed according to the alcohol they contain but at different rates per litre of pure alcohol according to strength based on 4 bands: 1.2-3.4% ABV, 3.5-8.5% ABV, 8.5-22% ABV and above 22%. Products falling in the higher bands are set to pay a higher rate than those in the lower bands.
Products falling within each of the 1.2-3.4% ABV, 8.5-22% ABV and above 22% bands would pay the same rate (8.4p per unit, 25.88p per unit and 28.74 p per unit) irrespective of the product or source of the alcohol.
Unfortunately, the Government’s proposals will see duty increase for 70% of all wine, for 80% of still wine, over 95% of red wine and 100% of fortified wine. Under the proposed new regime, wine and sparkling wine between 8.5 per cent ABV and 22 per cent ABV would be taxed at £25.88/litre pure alcohol. We are supportive of simplification of the tax system and believe that a taxation system providing incentives for low alcohol beverages and encourages reducing alcohol content is appropriate. Under the proposed new regime, wine and sparkling wine between 8.5 per cent ABV and 22 per cent ABV would be taxed at £25.88/litre pure alcohol.
The UK Government is currently consulting over the proposals. Australian Grape & Wine, working closely with our companies and other exporters to the United Kingdom, are all supplying submissions to the UK Government (see the Australian Grape & Wine submission here). Both the Minister for Trade, Dan Tehan and the Minister for Agriculture, David Littleproud are supporting the industry. We are supportive of simplification of the tax system and believe that a taxation system providing incentives for low alcohol beverages and encourages reducing alcohol content is appropriate. However, the disproportionate impact of the proposed duty increases on wine and the system proposed cause us significant concerns. We will closely engage with the UK Government over the coming months, to try and seek a better outcome.
Tony Battaglene
Chief Executive, Australian Grape & Wine
