7 reasons why wine duty should be cut DUTY ON WINE: A WINE MERCHANT’S VIEW It’s the time of year when the wine industry in the UK awaits with bated breath the decision of the Chancellor on alcohol duty; in fact in 2022 it’s not the first budget this autumn and after the recent turmoil in the markets and with the signs that we are entering into a recession, the outlook is not great. In his short time as Chancellor Kwasi Kwarteng said he would maintain the freeze on alcohol duty but Jeremy Hunt scrapped that decision. Will he or won’t he raise duty on wine again in the Budget, and perhaps more pertinently, if so, by how much? As a reminder alcohol duty is, according to HM Revenue and Customs (HMRC) “a tax that is charged on alcohol produced or processed in the UK or brought into the UK for consumption.” You may not notice increases in duty directly as this tax is paid by your retailer when the wine leaves a bonded or customs-controlled warehouse to go onto their shop shelves or to be sent directly to their customers; it is incorporated into the price that you pay. And we all know how wine prices, like everything else, have been rising recently. Duty on wine is charged at different rates according to the type of wine and according to alcoholic strength which means that currently £2.23 of the price of a bottle of still wine between 5.5% ABV and 15% ABV is duty. This excise duty is in addition to value added tax (VAT) and in fact excise duty itself incurs 20% VAT making it £2.68 including VAT. And the excise duty rate – £2.23 or £2.86 on a bottle of sparkling wine – is regardless of whether the bottle of wine has cost you £5 or £50. This by the way is one of the reasons why the starting price of my wines with attitude is around £15. For a £5 bottle of wine, £3 or 61% is made up of duty and VAT whereas ‘only’ 31.5% of a £15 bottle of wine goes to the government. But don’t get me started on the subject of cheap wine, let’s get back to the Budget and the likelihood of an increase in duty on wine.   The UK government’s policy paper on duty on alcohol states that all alcohol duty will rise by the Retail Price Index every year. This means that this next Budget the wine industry could see the Chancellor raising those rates of duty by about 12.6% (Sept 22’s RPI rate) to £2.51 for still wine and £3.22 for a bottle of sparkling wine, ignoring VAT. Gulp! You might think that a rise in line with inflation is fair – there is a huge deficit to sort out after all – however there are a number of things to bear in mind… 1. We already pay rates of duty that are way higher than most EU countries. Although we are no longer in the EU, a comparison with 27 other countries is worth making. The level of excise duty payable on wine is set locally in each EU country; the EU just sets a “harmonised minimum rate” of alcohol duty for wine. That harmonised minimum rate for still and sparkling wine however is… €0, yes €0. So each country is free to choose what it charges and many countries choose not to charge any duty at all on wine (though the EU is reviewing its current practices).   In the chart below produced from 2018 rates per hectolitre (in Euros according to the European Commission Excise Duty tables) you can see that 14 of the then 28 EU members did not charge excise duty on wine; in 2020 it was 15 of 27. Some of those that do charge excise duty only apply the charge to sparkling wine. If we compare the UK with EU countries, the UK pays one of the highest rates, the third highest rate after Ireland and Finland. The top 4 countries including the UK paid over €100 more per hectolitre than each of the rest of the excise duty paying countries; in the UK in 2018 we paid about £1.10 more in duty per bottle of still wine than Lithuania and about £2.42 more per bottle than France. Duty on wine in the UK rose by an average of almost 6% p.a between 1987 and 2021 whereas the annual rate of inflation averaged 3.3% over the same period. It doesn’t seem quite fair somehow does it? 2008 was the worst year for wine lovers – the rate of duty rose 9% in March and then 8% in December. 12.6% seems a lot to stomach in one go.   2. To make matters worse the value of the pound declined by almost 21% over the same 35-year period. Events like Brexit, Covid-19 and the war in Ukraine have all contributed to sterling’s recent acute devaluation with the rising costs of holidays abroad and of imported goods being felt by all. 3. At the same time that excise rates escalated and we receive fewer Euros or US dollars for our pounds, inflation has been rising and most recently at an alarming rate so we have a triple whammy. 4. Health is cited as one of the main reasons for the high rates of tax on alcohol and there is no denying that it makes sense to support the health services required for alcohol-related illnesses. Whilst much is made about high levels of duty being a much-needed means to reduce alcohol consumption in the UK, there is as much evidence to suggest that the two are not directly linked as there is evidence to the contrary. Nor do health concerns explain why increases in duty on wine seem to be excessive when compared with rises in the rates applicable to beer and spirits. Organisations lobbying for increased rates of duty on alcohol