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WSTA calls on Chancellor to cut alcohol duty and extend VAT reduction to boost delayed Covid Recovery

Created: 14 January, 2021

The WSTA has called on the Treasury to cut wine and spirit duty and extend the hospitality VAT reduction in the upcoming Budget to help the sector recover, as Covid-19 continues to impact wine and spirit businesses.

In a submission sent to the Treasury today (Thursday), the WSTA has set out its vision to help businesses survive, recover, then thrive in 2021 and beyond.

The UK’s largest alcoholic drinks trade body described the importance of a low tax environment and greater government support to meeting UK wine and spirit business’ international potential.

A duty cut will safeguard UK wine and spirit businesses, many of whom are SMEs, protect future income to the Treasury, and support a quick and sustainable recovery for the UK’s hospitality sector – in which wine and spirits will play an important role.

As it stands, the temporary cut in VAT to 5% on soft drinks and food will lapse in March. To support the hospitality industry in their recovery, the WSTA supports extending the scheme until at least March 2022.

But, the WSTA argues, the scheme must go further, and is urging the Government to broaden the scheme to include alcoholic drinks.

British wine and spirit businesses support over 360,000 jobs across the supply chain as well as bringing in around £50 billion to the British economy.

Wine and spirits play a vital role in the hospitality sector, which acts as the ‘shop window’ for products – by broadening the scheme the Chancellor can throw his weight behind wine and spirit producers, and the wider hospitality sector.

In March of last year, the Chancellor announced that all alcohol excise duties were frozen, which avoided increasing the burden on drinks industry businesses and consumers as measures to address the Covid-19’s spread took hold – but the closure of on-trade venues days after the announcement meant that businesses were unable to feel the benefit.

A cut this time around would be a show of support for businesses after an incredibly challenging 2020, with the outlook for 2021 still uncertain.

In the medium term, the WSTA wants to work with government to achieve a simpler, fairer system of alcohol taxation in the UK through the ongoing Alcohol Duty Review.

Miles Beale Chief Executive of the Wine & Spirit Trade Association said:

“We have submitted our asks to the Treasury ahead of the Budget in March. We appreciate that the public finances are under tremendous pressure, but so are the businesses we represent – that is why our asks are modest and targeted at promoting the recovery of our sector throughout 2021.

“With greater support from the Government to weather the Covid pandemic, the UK’s wine and spirit businesses can be ready to recover, grow and explore new opportunities as the UK forges new trading relationships across the globe.

“As suppliers into the hospitality sector, their economic success is linked to recovery of the broader hospitality sector with consumers keen to support pubs, bars and restaurants to sample the great wines and spirits our members produce and import.

“To survive then recover and eventually thrive, wine and spirits businesses need a duty cut and an extension of the hospitality VAT scheme to include alcoholic drinks; and next through the Government’s Alcohol Duty Review, which must deliver a simpler, fairer and supportive alcohol taxation regime.

“We believe that review holds the key to stimulating growth in our SME-rich, internationally renowned, potential-packed wine and spirit sector.”

Duty is currently so high that 55% of the average priced bottle of wine and 73% of a bottle of spirits, at 40% abv, sold in shops and supermarkets is now taken by the Treasury in tax and VAT.

The UK alcohol industry is one of the most heavily taxed in Europe, as we are stung by the third highest duty rates for wine and fourth highest duty rate for spirits when compared with EU countries.

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