Drink groups claim victimisation in UK tax cuts

By Neil Merrett

- Last updated on GMT

Related tags Tax

UK government tax initiatives designed to put the feel good feeling back into the country’s consumers to get them spending has led to calls of ‘humbug’ from drink manufacturers, which claim they are again being unfairly targeted.

A number of trade associations representing both wine and spirits makers in the UK have hit out at British chancellor Alistair Darling’s decision to raise excise rates on alcohol by eight per cent. Some industry analysts say that while additional promises to cut Value Added Tax (VAT), which is paid on some EU-based goods and services, were more favourable, any potential benefit to drink manufacturers may be lost.

The industry’s ire comes amidst yesterday’s budget announcement that VAT rates will be cut by 2.5 per cent to 15 per cent for thirteen months from 1 December as part of a stimulus packet to encourage overall spending.

Revenue fears

Edwin Atkinson, director general of national body,​the Gin and Vodka Association (GVA), suggested that the chancellor’s decision would prove counter productive to plans aimed at boosting the UK economy. Atkinson highlighted the decision made earlier this year to push up excise duty on taxes, a move seen widely as an attempt to target concerns over drink binging in the country, as further examples of the governments targeting of the alcohol industry.

“Spirits excisereceipts have already fallen by £40m (€46m) this year since the 9 per cent excise rise in March,” ​he stated. “There is seemingly no likelihood of his achieving his projected revenue increase of £600m (€704m) this year.”

According to GVA estimates, average tax on bottles of spirits sold in supermarkets will have risen by over eight percentage points since March this year.

“This unplanned duty change coming at such short notice before Christmas will hit businesses very hard but the smaller traders without credit capacity will be find life particularly difficult,”​ added Atkinson

Having a wine

The Wine and Spirit Trade Association (WSTA) also reflected these concerns making full use of Charles Dickens-like imagery to suggest that Darling was providing little cause for celebration to the industry and consumer alike over the Christmas period.

“This year he will have increased tax on alcohol by a massive 17 per cent, hurting consumers when they have little else to cheer about,”​ stated WSTA chief executive Jeremy Beadles. “It’s the wrong tax rise at the wrong time.”

Glass half full?

Management consultancy Deloitte told BeverageDaily.com that it appears the situation could have been worse for the industry though.

Daniel Lyons, an​analyst for the group said that manufacturers of certain products like spirits, which are not exempt from VAT charges, would be better off from the tax cuts, despite the hikes in excise duty.

“If VAT stayed the same the situation could have been worse,”​ he stated. “However, the rise in excise rates has meant that any potential benefits aren’t being passed on.”

Lyons claimed that while there increasingly appeared to be social policy aims in the government’s use of taxation towards goods linked to health concerns like alcohol and junk foods, there appeared to be some selectivity in their judgment.

The analyst said therefore that while some products like chocolate biscuits may benefit from the changes, certain alcohol manufacturers were less likely to witness improved fortunes.

Related topics Markets

Related news

Show more