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Post-Brexit alcohol tax change ‘unworkable’ says UK wine merchants

British Prime Minister Rishi Sunak has hailed it as “the most radical simplification of the tax on alcohol in over 140 years”, triggered by Britain’s departure from the EU.

But for the wine industry, the change to alcohol taxation, announced in the Budget last fall and set to go into effect in February 2023, seems like a production nightmare. complicating the bureaucratic headaches importers have had to go through as a result of Brexit.

Under EU rules that still apply, wines and fortified wines are taxed in three groups, with another higher bracket for sparkling wines. As suggested by Sunak, there would be 27 different ratios for the wines on an ascending scale with each rate increasing by half a percentage point in volume.

Liquor traders are calling it the “sunshine tax,” because the strength of wine, unlike beer and spirits, is determined by climate. This means that stronger wines from hotter countries like Australia will be fined, while some lower alcohol wines from Germany, for example, will attract less tax.

Alcohol industry insiders say the complexity of the changes will increase regulatory costs, drive up prices for consumers and reduce the range of wines available in the UK.

“The Tory Party works towards reducing bureaucracy and increasing operational efficiency. This would be quite the opposite,” said Ed Baker, chief executive officer of Kingsland Drinks, which imports bulk wines and spirits and bottled them for supermarkets and other shops outside of Manchester.

Ed Baker CEO of Kingsland Wines
Ed Baker says Sunak’s proposals would be the exact opposite of reducing bureaucracy © Jon Super / FT

The all-party parliamentary group on wine and spirits reached the same conclusion in a report produced in partnership with the Wine and Spirits Trade Association to be published next week. The report is intended to examine the impact of Covid-19 and Brexit on small and medium-sized businesses in the alcohol trade, but has been adjusted to take into account proposed changes to the tax regime.

The report said: “In response to the government’s proposals, the UK’s wine and spirits SMEs have made it clear: the measures are not meeting their own objectives. is fairer and easier to do”.

WSTA estimates that the changes will bring in an extra £250m for wine, which has become the most widely consumed alcoholic product in the UK during the pandemic. But additional revenue for the competition will be offset by tax breaks on beer and cider.

The association says 80 per cent of wine consumed in the UK is above the 11.5 per cent alcohol content threshold, as taxes rise.

“There’s not much that the winemakers can do because you can’t control the ABV [alcohol by volume] in an agricultural product. Lucy Panton, WSTA communications director, says it’s the sun that determines the sweetness of the grapes and the sugar that determines the ABV.

Wine importers say the new rules mean ABV will need to be continuously assessed on thousands of labels, even across different varieties of the same wine, which can vary in strength with the seasons. This will make valuation time-consuming, a yearly moving target, and will require significant investments in HR and IT.

Steve Finlan, chief executive of the 170,000-member Wine Association, the world’s oldest wine club, said: “In a post-Brexit world, where better regulation is a big buy, it’s hard. to design a more complex system.

The Wine Association's Cellar Gallery in Stevenage
The Wine Association’s Cellar Gallery in Stevenage. Wine importers say the new rules mean ABV will need to be continuously assessed across thousands of brands © The Wine Society

Australian wine importers are particularly excited. Tim Curtis, corporate director of Direct Wines, one of the largest online wine merchants, welcomes the removal of the premium tax on sparkling wines, which will benefit UK vineyards .

However, he said for Australian manufacturers, the massive tax hike outweighed any benefits from the free trade agreement signed with Britain in December 2021.

“93% of our Australian wine will be taxed,” he said. “They save 9p a bottle because of the FTA. But with 15% Shiraz from the Barossa valley, you’ll have to pay an extra 68p of obligation when you save that 9p. ”

Liquor traders fear there will be an increase in fraud as a result of these changes, with some producers misrepresenting alcohol levels in order to attract lower taxes, or even dilute their wines – a prospect terrify wine connoisseurs.

Daniel Lambert, a wine merchant based in Wales, described the new regime as “absolutely unworkable” and said the additional compliance costs of the new rules could put smaller companies at risk. , independence was pushed out of the market.

“The right importer is shipping a pallet from here and a pallet from there and bringing in interesting products – they won’t be able to cope,” he said.

The government closed formal consultations on the reforms at the end of January. It defended the changes, arguing that winemakers had to report ABVs for labeling purposes, and that rates could move all within a range.

“We don’t make 27 bands. For all wines with an ABV between 8.5% and 22%, there will be a grouping based on alcohol content,” the Treasury Department said.

“Our reforms will replace outdated rules with a conventional approach that puts the taxation of stronger beers, wines and spirits on an equal footing, making sparkling and lighter wines more suitable. more affordable for UK drinkers.

This is accompanied by a freeze on alcohol tax in the last three budgets, saving consumers a total of £5.7 billion.

https://www.ft.com/content/d05f1729-5cbd-4585-a93b-25357a3b0d7b Post-Brexit alcohol tax change ‘unworkable’ says UK wine merchants

Adam Bradshaw

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