UK Prime Minister Rishi Sunak's proposed wine tax changes have raised serious concerns across the industry. The new regulations, due to come into force in February 2025, could lead to price rises, limit consumer choice and create additional red tape for small businesses.
The Proposed Wine Tax System
Prime Minister Rishi Sunak, when he was Chancellor of the Exchequer, announced the new tax system at the 2021 Spending Review. It promises to be the most significant changes to the taxation of wine imports in recent years.
According to the new scheme, duty on wine will increase by 2p for every 0.1% increase in alcohol content. However, industry leaders have said that the new scheme is "unworkable", posing a significant threat to small importers.
With over 400,000 jobs and a £72 billion contribution to the economy, according to the Wine and Spirit Trade Association (WSTA), the UK wine industry has been very reticent about the changes. There are fears among small businesses that the new regulations will overwhelm them with red tape, disrupting their businesses.
Matthew Hennings, owner of a small family business, Hennings Wine, in Sussex, imports around 500,000 bottles a year. He warned that the new tax regime could prove "incredibly burdensome" for his business.
We will have to hire another full-time employee just to manage more than 30 duty bands, up from two to three currently. It will be a struggle even then due to increased paperwork.
Furthermore, Mr Hennings expressed concern about the variable alcohol content of wines, which could make pricing speculative.
The Impact on Pricing
Prices for wines, particularly table wines stored in vats to ensure freshness and bottled to order, could become highly volatile. The alcohol content of these wines can vary from 11.2% to 11.8% in the space of a year, depending on changing weather conditions during the harvest. Such fluctuations could destabilise prices charged by restaurants and other businesses.
The "bond" which covered 85% of the estimated 1.2 billion bottles sold in the UK last year at a fixed duty of £2.67 for wines between 11.5% and 14.5% alcohol by volume is due to expire on 1 February. Despite intense lobbying from Majestic Wine, The Wine Society and the WST
Industry Criticisms and Backlash
With the changes sparking cross-party criticism, former Home Secretary Priti Patel voiced her concerns in a debate in March. She claimed that the new tax rules increased red tape, contrary to the government's original intentions.
WSTA chief executive Miles Beale calls the new tax rules "ridiculous". He predicts "substantial" price rises of over 40 pence per bottle for the strongest wines.
Meanwhile, John Colley, managing director of Majestic Wine, disputed the government's claims that the tax system would be simplified. He said the previous system, pre-Brexit, was much easier to manage.
In a similar move, Kim Wilson, founder of North South Wines, which imports around 15 million bottles a year for major supermarkets, called the 0.1% duty bands "100% unmanageable". Fluctuating alcohol levels in vintages, which can vary by as much as 0.5%, could pose significant problems.
This is frankly a stupid decision.