Wine trade fury at Sunak tax plan which will force up prices and create ‘unworkable’ red tape

A shake-up of alcohol duties touted by Boris Johnson as one of the key benefits of Brexit has sparked fury among the UK’s wine trade, who warn it will force up prices for consumers, sow confusion in shops and create “unworkable” levels of new red tape.

Chancellor Rishi Sunak announced a review of excise duties in his 2020 Budget, saying that the UK would “make the most of the opportunity of leaving the EU” by simplifying the regime in place as part of the trading bloc.

But Treasury proposals set to take effect in February 2023 would replace a single rate of taxation for most still wine with 13 different bands of duty levied on bottles according to strength – with 14 more for fortified wines.

The change will add up to 68p in tax levied per bottle on wines drunk by millions of Britons, while saving cash for those choosing relatively rare low-strength brands with less than 11.5 per cent alcohol, according to figures from the Wine and Spirits Trade Association (WTSA).

Still wine is the only product to face increases in duty, while levies on beer and cider will fall and spirits remain unchanged. The hit to wine drinkers is estimated at around £250m a year.

And wine dealer Daniel Lambert from south Wales told The Independent that the knock-on effect of the rise on pricing margins could see drinkers paying as much as 27p more for every 0.5 percentage point in alcohol by volume (ABV) above 11.5.

He said the complex new scheme was “completely impractical and unworkable” for the industry to operate.

Wine brands could leap from one tax band to another based on factors beyond producers’ control, such as the impact of weather conditions on grapes which can significantly alter the ABV of individual wines from one vintage to the next.

In a New Year message marking the first anniversary of his trade deal with Brussels, Mr Johnson listed “simplifying complex EU alcohol duty rates” as one of a handful of benefits which he believes Brexit has delivered to the UK.

But WTSA chief executive Miles Beale said the proposed changes were in fact “much more complicated“ for consumers of the UK’s favourite alcoholic drink, chosen by 33m people a year.

“The proposals replace one rate of tax for wine with 13 new ones,” said Mr Beale. “And that’s before we talk about British fortified wine products – it’s another 14 rates for them.

“What’s more, wine’s ABV can vary by up to 0.8 per cent, label versus liquid. This means a tax change every half-degree of alcoholic strength is not implementable in real world.”

The wine trade has welcomed Mr Sunak’s abolition of the higher rate of £2.86 a bottle for sparkling wine, which will in future be taxed in line with still products.

But Mr Beale said the new band system for all wines and fortified wines between 8.5 and 22 ABV – described in Treasury documents as “a single flat rate per litre of pure alcohol” – would in effect mean duty per bottle varying from £1.65 at the bottom of the range to £4.27 at the top.

Bottles with an 11.5 ABV will continue to incur the current £2.23 rate, but tax at 12 ABV will be £2.33, at 13 ABV £2.52, at 14 ABV £2.72 and at 15 ABV £2.91.

Mr Lambert said the impact on traders and consumers will be “seismic”.

“Most wine drunk in the UK comes in at about 13-14.5 ABV,” he said. “We think the average is around 13.2, so the additional cost when margins and so on are taken into account could come to £1-£1.50 a bottle. That’s a lot more money to expect customers to pay.

“To put it in context, the government were boasting that their trade deal with Australia would knock 20p a bottle off Australian wines. That is going to be more than wiped out at a stroke by these changes.”

Businesses’ ability to market upcoming vintages will be undermined because it will be impossible to know the alcohol content – and therefore the tax liability – until after grapes are harvested, he said.

“Customers will have no comprehension of why the price of different brands are going up and down,” he said. “The complications and extra paperwork will be worse for bigger retailers because they have a wider range to keep track of, and the likely result is that the range available to the consumer will get smaller.

“I also fear it will open up the entire excise system to fraud, as there will be a financial incentive to under-estimate strength.”

The wine sector is understood to be voicing strong opposition to the Treasury in a consultation which closes at the end of this month.

In an editorial, trade magazine The Wine Merchant said the industry expected “supply-chain havoc” due to vast variation in duties payable on mixed pallets of wine.

Hal Wilson, of Cambridge Wine Merchants, said: “There are so many reasons the proposed tax policy fails in its aim to be fairer and simpler. Different rates for wine, beer and spirits at the same ABV, incredibly complex to administer, only wine to be taxed more.”

And retailer Eynsham Cellars said: “Wine drinkers and importers are under attack from these totally unfair and massively complex new duty proposals.”

A Treasury spokesperson said: “We have adopted a common-sense approach to alcohol duty by taxing drinks in accordance to their strength, that will come into effect from February 2023.

“This approach puts the taxation of stronger beers, wines and spirits on an equal footing for the first time ever.

“We’re also supporting pubs and keeping costs down for consumers by freezing alcohol duty rates – a tax cut worth £3 billion.”

Douglas Mateo

Douglas holds a position as a content writer at Neptune Pine. His academic qualifications in journalism and home science have offered her a wide base from which to line various topics. He has a proficiency in scripting articles related to the Health industry, including new findings, disease-related, or epidemic-related news. Apart from this, Douglas writes an independent blog and assists people in living healthy life.

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