New UK wine taxes will lead to higher prices

British wine professionals have just over the weeks to dissuade their government from introducing new duty rates that will complicate the market and raise prices for consumers.

Tax on popular wines like Casillero del Diablo will rise by nearly 20%
Tax on popular wines like Casillero del Diablo will rise by nearly 20%

As 2021 drew to a close, UK prime minister, Boris Johnson, gave his nation a new year message that – unsurprisingly perhaps – focused on successes associated with Brexit. Among these, he included the fact that Britons will be now able to buy and sell products using ‘imperial’ units such as ounces, pounds and pints rather than kilograms and litres. They will, he said, also benefit from a new, simpler, ‘fairer’ system of alcohol duty rates.

The model he was referring to had been revealed by his finance minister, Rishi Sunak in October. Duty, it was proposed, would be linked to alcohol levels: the stronger the drink, the more heavily it would be taxed. Lower strength cider would become cheaper, while higher ABV examples, often associated in Britain with abuse, would go up in price.

Probably as a gesture towards Britain’s young wine industry, the ‘luxury’ extra duty traditionally levied by the UK treasury on Champagne and sparkling wine would be abandoned; a 12% Prosecco or English fizz will carry the same tax burden as a 12% Pinot Grigio. Both would be more lightly taxed than any style of wine with a strength of 13 or 13.5%.

Early media reports focused on cheaper Prosecco and 10% white Zinfandel, and on the gesture to domestic wineries, one of which, Chapel Down one of Britain’s leading sparkling wine producers said on Facebook that “We, as well as the wider English wine industry welcome today’s announcement… of duty reforms wholeheartedly!”. Andrew Carter, Chapel Down’s chief executive stated “The duty saved will enable the industry to create jobs, support families, and bring even more young talent into this exciting, developing sector as it recovers from the pandemic.”

But not quite yet. The new taxation structure would, it seemed, be introduced in 2023, unless the UK industry could persuade the government not to do so, or to amend it – by the end of January 2022.

Complications galore

It did not take long for British wine industry professionals outside the domestic sparkling wine sector to see the problems implicit in the system. How would having over 20 different duty levels be ‘simpler’? How would it all be policed? Who would check that, whatever its label might say, a bottle of red had a strength of 14% and subject to duty of £2.72, rather than 14.5%, which would carry £0.09p more duty?

As these professionals raised their concerns with the government, the broader media finally got the message. On January 2, within days of Johnson’s new year message, the historically pro-government Daily Mail had done its sums (using figures provided by the UK Wine & Spirit Trade Association) and told its readers just how much more they would be paying for their favourite reds and whites.

 

"The Daily Mail reacts to new duty rules"
The Daily Mail reacts to new duty rules

McGuigan’s Reserve Chardonnay (12%) would go up from £7 to £7.24. The price of Casillero del Diablo (13.5%) would rise from £8 to £8.47. Hardy’s Shiraz (14%) would cost £7.58, rather than its current £7. “Britain’s most popular bottles of wine” the newspaper said, were “set for sharp price rise.”

The new duty rates will apply to Pernod Ricard’s popular Campo Viejo Rioja as well as to its Jacobs Creek wines from Spain. For some reason, however, the Daily Mail editors neglected to remind their readers of the claims in its pages that voting for Brexit would get them cheaper wines from outside Europe. In fact, the current £2.23 duty will go up by 4-24% on all wine with a strength of 12-14.5%. For a 22% fortified wine, the rise will be 43%.

The UK wine trade has just over three weeks to prevent the new measures becoming law. If it fails, one of the world’s leading wine importing nations will become a far more complicated and decidedly less attractive market

"The new duty rates - courtesy of the WSTA"
The new duty rates - courtesy of the WSTA

Robert Joseph

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