Richard Hemming MW: considering the case against tax cuts
In the digital era, it’s perhaps fitting that our opinions have become binary. Online, we tend to only see viewpoints we already agree with, and this feedback loop of positive reinforcement makes us increasingly polarised. Consequently, the middle ground has been abandoned and accommodating your opponent’s view has become something for only the very brave or the very stupid. I’ll let you decide which is the case as I consider the case against cutting tax on wine.
This August, the trade-backed UK Wine Drinkers group launched a high-profile campaign calling for wine tax to be cut. The main reasons for this demand are that wine tax hasn’t been cut since 1984, that 61% of a £5 bottle goes to HM Revenue & Customs, that wine is the nation’s “most preferred” alcoholic drink, and that duty has risen faster for wine than other alcohol.
When I asked the WSTA what benefits would be expected from a cut in duty, it explained that, because inflation and exchange rates are putting pressure on prices, a duty cut is seen as the “only [way] to ease this pain”.
I don’t dispute these claims, and I understand why many of us stand behind them, but let’s consider the opposing perspective.
The enemies of the wine trade could easily counter these arguments. Tax may be 61% of a £5 bottle, but so what? Besides, the £5 bottle is now considerably below the average retail price. Why does it matter that tax hasn’t been cut since 1984? How reliable is the claim that wine is our “most preferred” drink? By cherry-picking other statistics or conducting their own research, these claims could be quickly undermined.
The stronger argument is that wine has been unfairly penalised. This is objectively true, but does it follow that a duty cut would claw back some profitability throughout the supply chain? In a retail market dominated by supermarkets, there’s just as much chance that shelf prices could drop following a duty reduction, in an attempt to drive footfall and grab market share.
Furthermore, the strength of the anti-alcohol lobby combined with the parlous state of British politics seems to me the worst possible context for demanding tax relief on a
non-essential item that is still viewed by many as unduly damaging to large sections of society.
I know that our industry is responding well to irresponsible drinking, and that the figures indicate that harmful drinking is in decline, but I’m afraid that requesting tax cuts might appear to undermine that progress.
I also know that wine is a valuable British industry both for employment and revenue generation, which therefore merits support.
But isn’t there a better way to support our industry than through tax breaks?
How about encouraging wine drinkers to trade up – not to seek tax cuts, but to emphasise the premium experience that wine offers, and explain why it is worth paying more?
That tactic might seem either very brave or very stupid – but I expect the truth lies somewhere in the middle.