LONDON: Cheers, George! British drinkers already pay 55 per cent to the taxman on the average bottle of wine. So fizz and claret drinkers are unlikely to be toasting the chancellor when the tax bill on wine sloshes over the £4bn mark for the first time this year.
Wine duty, which disproportionately hits plonk more than grand crus, raised £3.8bn for the exchequer last year, having grown at an annual rate of almost 6 per cent over the past 15 years.
If trends continue, receipts will hit £4bn in 2015-16, according to the Office for Budget Responsibility. The government’s fiscal watchdog also expects this to rise to £5bn by 2019-20
British drinkers pay 55 per cent to the taxman on the average bottle. On a cheap bottle of prosecco, as much as 70 per cent will go to HM Revenue & Customs.
Wine duties in the UK are also the second highest in Europe, lower only than in Ireland, and account for two-thirds of all tax collected on wine across the EU, according to the Wine and Spirit Trade Assocation.
Most European countries, including Germany, Italy and Spain, do not levy duty on non-sparkling wine. The French pay just 3p tax per bottle.
In the UK, duty stands at £2.05 a bottle. With value added tax payable on top, HMRC receives most of the money paid for any bottle sold at less than £6.20, according to FT research.
Only 47p of the money spent on a £5 bottle of red or white wine goes on the drink, according to estimates by Bibendum PLB, a wine and spirit merchant.
The upside for connoisseurs of fine wines, however, is that the taxman’s take goes down as a proportion of higher-priced bottles.
A bottle of red or white retailed at £20 would contain wine “worth” £7.17, Bibendum found. A consumer buying a £10 bottle would spend £2.87 on the actual wine.
“It is starkly apparent that spending just a little bit more on a bottle gets you much more wine for your money,” said Alex Linsley, head of market insights at Bibendum.
In the UK, however, a longstanding “champagne tax” means fizz drinkers pay £2.63 a bottle in duty.
Buyers of bottles of sparkling wine costing less than £7.90, such as the currently hugely popular Proseccos, are spending most of that money on duty and VAT. Tax on a £5 bottle of prosecco amounts to 69 per cent of the price paid.
The Wine and Spirit Trade Assocation is calling for the chancellor to cut alcohol duties by 2 per cent in this month’s Budget, backed by lobby group the TaxPayersAlliance.
Dia Chakravarty, political director at the TaxPayersAlliance, claimed cutting tax on products like wine would help families struggling with the cost of living.
“Like any consumption tax, wine duty is deeply regressive and hits those on lower incomes the hardest.”
Tax receipts from wine sales have more than doubled in the past 15 years in the UK, outpacing those from beer and spirits and becoming the largest source of alcohol taxes in 2012-13.
Overall, alcohol duties raised £10.5bn in 2014-15 for the exchequer — roughly the same as stamp duty on property purchases.
Wine has also become more heavily taxed in the UK. Since 2007, the levy has risen by 54 per cent, compared to only 41 and 34 per cent respectively for spirits and beer.
Kate Smith, a senior research economist at the Institute for Fiscal Studies, said duty per unit — “a sensible starting point for taxing alcohol” — was much higher for wines than for cider, but slightly lower than for spirits.
The IFS has found that stronger wines are also taxed less than weaker wines, because the duty is flat. The heaviest drinkers, who are responsible for the greatest social costs of alcohol, also consume stronger drinks, Ms Smith said.
“Corrective taxes should aim to target consumption that generates social costs . . . revenue-raising should be secondary.”
