Alcohol Duty Escalator abolished but WSTA calls for a further 2% Duty reduction
The ‘Call Time On Duty’ Campaign, spearheaded last year by The Wine and Spirit Trade Association (WSTA), successfully resulted in the government’s alcohol and duty escalator (ADE) being scrapped in the 2014 budget. The Campaign set out to have the automatic year-on-year tax increases abolished as they were undermining the competitiveness of the industry. This is great news for the UK Spirits Market because since the ADE’s introduction in 2008, tax on spirits has increased by a staggering 44%. Duty is currently calculated at a rate of £28.22 per litre of pure alcohol. This means that for a 70cl bottle of cognac with an abv of 40%, the duty to be paid is £7.90. This duty is then added to the cost of the cognac before VAT is calculated so in effect, the consumer is taxed twice. For example, this bottle of Hermitage 1989 Cognac has £8.69 duty plus £14.07 VAT included in the price of £84.42. Good cognac, which is produced in limited quantities, will therefore always be more expensive than ordinary brandy.
It will be some time before the benefits of eradicating the ADE are realised and with On Trade spirits sales down 5% in the last quarter, the WTSA are now calling on the Chancellor to go even further with his tax reforms. Their ‘Drop The Duty’ Campaign, which calls on the government to cut alcohol duty by a further 2% in the 2015 budget, has been launched and we are right behind them!