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Tax hikes deter wine giants

25 Mar 2010 by Jancis Robinson

British wine drinkers were already some of the most heavily taxed in Europe before yesterday's announcement by our bushy-browed Chancellor of the Exchequer Alistair Darling confirming that duties on wine will continue to rise. He is proceeding with his previously stated policy of imposing increases in taxes on alcohol by two percentage points above inflation.

Even before yesterday's Budget, a total of 55% of the £4.32 average cost of a bottle of wine bought in the UK went straight to our government's increasingly needy coffers: £1.60 on excise duty, 65p on VAT and 11p on customs tariff for wine imported into Europe. But from midnight on Sunday this will rise further, with the effect of the increased taxes typically being an additional:

10p on a 75cl bottle of wine
36p on a 70cl bottle of spirits
2p on a pint of beer

Unfortunately, the mass market is so price-sensitive that the big retailers will be unwilling to increase prices across the board so, as has happened successively over the last few years, suppliers will be pressurised to make even more savings, and the quality of wine behind many mass-market labels is likely to decline further (although see reasons why this may not be true of some Australian brands here).

Yesterday's 5.1% increase in alcohol duty means taxes on wines and spirits have risen by more than 25% and 20% respectively since March 2008 and British drinkers have contributed an additional £4 billion worth of increased taxes to the Exchequer since Labour came to power in 1997.


Personally, I don't object too much to being taxed for such pleasure, but I do worry about the effects on the greater drinks business in the UK. (And there will presumably be real hardship in the West Country, LibDem land, as a result of Darling's special crackdown on cider taxes, up 13%, yesterday.) The big multinational companies in wine have already tired of trying to make a profit in the competitive British (and Australian) markets (see Companies slam British tax on wine) with the likes of Constellation ready to pull out of the UK and wind down or sell entire sectors of its business.

This may be good in the long term for the small, independent wine retailers on whom I am so keen, but it won't be much fun in the medium term for many big company employees and their families.

Tags:  uk wine market
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