‘Missed opportunities’ for spirits in Budget

9th March, 2017 by Kristiane Sherry

UK chancellor Philip Hammond has “missed opportunities” by neither cutting or freezing spirits duty in his Budget statement, meaning tax will now rise with inflation, the Wine and Spirit Trade Association (WSTA) has said.

Philip Hammond has made his first Budget announcement

The rate of inflation is currently 3.9%, as calculated by using the RPI estimate for September 2017 provided by the Office of Budget Responsibility.

The WSTA calculates that duty on a 70cl bottle of vodka at 37.5% will increase by 28p to £7.54, with duty on a 70cl bottle of gin at 40% rising by 30p to £8.05.

According to Scotch Whisky Association (SWA) figures, excise duty on spirits will now increase by nearly 4%, or 36 pence a bottle, a move the group describes as a “major blow” to the industry.

The total level of tax – excise duty and VAT – on an average £12.90 70cl bottle of Scotch now stands at 79%, one of the highest levels in Europe and 21% higher than in 2010, the SWA said.

Excise on that bottle now stands at £8.05 with the total tax totalling £10.20.

New excise rates will be levied after midnight on 12 March.

The decision follows a duty freeze announced in the 2016 Budget by his predecessor George Osborne in 2015, and a historic 2% cut in 2015.

“It is disappointing that the Chancellor has failed to support a great British industry, said Miles Beale, WSTA CEO. “He has increased what were already excessive and unfairly high rates of duty for the UK’s wine and spirit consumers and businesses.

“Between Brexit’s impact on the pound and rising inflation the wine and spirit businesses face a tough trading landscape. This is a missed opportunity to back British business and help out struggling consumers.

“The added uncertainty of another Budget in six months’ time is unwelcome and will further undermine business – and consumer – confidence.”

‘Time for a new approach’

Julie Hesketh-Laird, SWA acting chief executive, said: “A nearly 4% duty rise and a 79% tax burden on a bottle of whisky is a major blow, reversing recent progress. Distillers will find it hard to understand why the Chancellor is penalising a strategically important British industry with this tax increase.

“At a time when government should be supporting a key home-grown sector, we face a damaging tax rise on top of the uncertainties of Brexit. Looking to the autumn Budget, we will be arguing strongly that it is time for a new approach to excise duty outside the constraints of EU excise law. The system is in need of a fundamental review and reform to make it fair and competitive.”

‘Bad for business’

Charles Ireland, managing director, Diageo Great Britain, said: “Today’s tax blow from the Chancellor is bad for the economy, bad for business and bad for the British public. It is staggering that the Prime Minister stood up in Scotland only on Friday and said that Scotch whisky is ‘a truly great Scottish and British industry… and directly supports tens of thousands of jobs’, and just five days later her Chancellor hammers this industry at home.

“Tax on Scotch Whisky is now so high – nearly 80% of the price of an average bottle will go straight to the Government. We believe this duty rate increase will reduce total tax revenue. We are calling on the Government to reverse this punitive tax hike and fundamentally overhaul what is clearly a flawed excise duty system.”

Elsewhere in the Budget, pubs will benefit from a £1,000 discount on business rates for the 90% with a rateable value of less than £100,000 a year.

Hammond also set the rates for the sugar tax, announced last year, which will levied against tonics and soft drinks, but not fruit juices.

Drinks containing more than 5g of sugar per 100g will be subject to a levy of 18p, while drinks with more than 8g sugar per 100g will face a 24p levy.

Hammond added that the will raise less revenue than forecast because companies are already reformulating their drinks.

This piece will be updates throughout the day with further industry comment.

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