UK tax hike on wine comes into effect as WSTA warns of depressed growth

UK – UK duty increase on wine came into effect February 1, 2019 in line with the rate of inflation with Wine & Spirit Trade Association (WSTA) warning that this could dilapidate the country’s wine industry.

In October, UK Chancellor Phillip Hammond during the Autumn 2018 Budget highlighted that tax on wine was set to rise alongside inflation.

The tax rise means duty on UK wine will be £2.23 (US$2.92) a bottle plus VAT (£2.68), up from £2.16 (£2.60 including VAT), while sparkling wine duty increases from £2.77 to £2.86 (£3.43 including VAT).

Tax on high-strength, cheap white ciders is also expected to increase.

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Taxes on beer, cider and spirits were frozen to support British pubs, saving an average of 2p on every pint of beer, 1p on a pint of cider, and 30p on a 70cl bottle of whisky.

According to the Chancellor, freezing taxes against the rate of inflation will mean drinkers will save an average of 2p on every pint of beer and 1p per pint of cider in 2019, as well as saving 30p on a 70cl bottle of Scotch Whisky.

‘Suffocating’ the wine industry

A tax rise was expected to include all categories of alcohol in line with inflation, but singling out wine hoped to protect the beer and spirits industry.

In the words of Hammond himself, the move was ‘for the patrons of the great British pub’ but the Wine & Spirit Trade Association (WSTA) has said that the increase in wine duty will stifle growth of the English wine industry.

WSTA’s European and International affairs director Simon Stannard said that the decision to single out wine for a tax increase had upset Australian producers, who viewed it as favouring domestic beers and spirits over imported wine.

Analysts say duty on still wine has doubled since 2000, with a marked acceleration in the last ten years.

Duty on still wine in the UK has gone up 72% over the last 10 years, compared to 15% in the 8 years before that and now accounts for around 61% on the cost of a £5 bottle of wine.

Sparkling wine has fared little better, rising 70% in the last ten years, compared to just 4% between 2000-2008.

Across Europe, only Ireland and Finland have higher taxes on booze than the UK, while 14 countries mostly wine producing nations have duty of less than 4p, which is levied primarily through VAT.

The duty is expected to be changed and likely be increased in the wake of a no-deal Brexit on 29 March.

“This comes at a particularly bad time for the UK wine industry – the threat of a no-deal Brexit is still on the table with the Government continuing to refuse to rule out leaving the EU without a deal on 29 March.

If this happens and the UK does leave without a deal, tariffs on wine from the EU will apply, meaning wine prices will rise by £0.20 per bottle for still wine and £0.37 for sparkling wine.

“These price rises are a direct result of the Government’s refusal to back the UK’s wine industry, which supports 190,000 UK jobs and its active decision to pass on a punishing duty rise; and the Government’s inability to resolve the UK’s trading relationship with the EU, from where over half our wine is sourced,” said Miles Beale, WSTA chief executive.

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