Drinks industry warns against ‘punitive’ tax hike

16th October, 2017 by Amy Hopkins

The UK government’s plans to increase wine and spirits duty with inflation will cost the industry £220 million (US$292m) in new tax liabilities, the Wine and Spirit Trade Association (WSTA) has estimated.

A second tax hike could hit sales of wine and spirits in the UK

November’s Autumn Statement could mark the second duty increase for wine and spirits in eight months after chancellor Philip Hammond scrapped the sector’s tax freeze earlier this year and raised all alcohol duties by 3.9%.

The WSTA is calling for Hammond to once again freeze duty on wine and spirits, claiming that a further 3.4% duty rise in line with RPI inflation could add 26p to a bottle of spirits and 7p to a bottle of wine.

Furthermore, the move has the potential cause problems for wine importers seeking trade negotiations after the UK leaves the EU. Secretary of state for international trade Liam Fox recently highlighted the importance of imports to the UK.

“We are hearing very mixed messages from government,” said Miles Beale, CEO of the WSTA. “On the one hand Liam Fox is championing the importance of imports to the UK. At the same time Philip Hammond is revving up to hit us with a second inflation busting hike in seven months in alcohol duty – making the UK less attractive to importers.”

He added: “Don’t be fooled into thinking that when the chancellor announces ‘no change’ to alcohol duty plans that he is doing everyone a favour. No change means that duty on all alcohol will rise in line with RPI inflation, which in March meant a rise of 3.9%.

“Next month we are set to see yet another 3.4% added to the staggering amount British consumers already pay in wine and spirit duty.

“Whether it’s English vineyards, new start up distilleries, producers, distributors or retailers, there are hundreds of British businesses that will be hit hard by another such increase.”

The WSTA argues that in freezing wine and spirits tax, the UK government could actually secure duty increases due to stronger overall sales. HMRC figures show that when spirits duty was frozen in 2016, revenues increased by 7% the following year.

Trade body the Scotch Whisky Association (SWA) recently released HMRC data showing that sales of Scotch had fallen by one million bottles after the tax hike on spirits earlier this year.

Chancellor Philip Hammond will announce the new budget on 22 November.

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