In 2013, the UK Government imposed an automatic tax increase of 2% above inflation, which was introduced by the previous Government in 2008, to increase duty on spirits & wine. The mechanism it used is called the Alcohol Duty Escalator, which is scheduled to be in force until 2015. At the same time, it abolished the duty escalator as it applied to beer and cut beer duty. Such a move was perceived as unfair, incomprehensible and going against sound taxation principles. As a result, the Wine and Spirit Trade Association (WSTA) and the Scotch Whisky Association (SWA) are calling on the Chancellor of the Exchequer to scrap the Alcohol Duty Escalator for all alcohol in 2014, one year before it is scheduled to end, and to freeze duty.
There are several good reasons why it makes sense for him to act quickly. The WSTA commissioned Ernst and Young to conduct an independent assessment of the impact of the Alcohol Duty Escalator on the industry and the potential benefits of scrapping the Escalator in 2014, a year earlier than anticipated. The E&Y report overall shows that simply by removing the Escalator the Government can provide the industry with the environment it needs to grow strongly, create jobs and make a greater economic contribution to the UK economy. The Report highlights the creation of 6000 new jobs, the generation of an extra £230 million for the public finances and additional economic activity of around £1 billion, all in 2014 if the Escalator is scrapped this year. Such a move will in particular support pubs, which are closing at a rate of 25 per week. Indeed, it was to protect pubs that the Chancellor gave as his reason for abolishing the Escalator as it applied to beer. However, despite this intervention, it is estimated that the overall tax burden on pubs, bars and restaurants still increased by around £34m in the last year alone. This was due to the significant duty increase on wine and spirits - 42% of the value of alcohol products sold in pubs, bars and restaurants - which more than offset the cut in beer duty. Given the importance of wine and spirits to the pub trade - as well as the wider hospitality sector – the Call Time on Duty campaign believes the only way to support the industry effectively is to scrap the duty escalator on all products.
To conclude, companies in Europe need predictable, stable environment that allows forward business planning, facilitates the growth of the industry and jobs, and promotes innovation, profitability and sustainability. Securing fair and equitable tax treatment for European spirits is key to that growth.
