In the Spotlight - Alcohol tax hikes
Tax hikes have taken centre stage in discussions between the alcohol industry and several national and state governments around the world over the last year. Michelle Russell reports on a global trend for raising drinks duty.
The British Beer and Pub Association (BBPA) yesterday (22 January) wrote a strongly-worded letter to Home Secretary Jacqui Smith over government plans for new restrictions on how pubs sell alcohol.
Penned by BBPA boss Rob Hayward, the letter argues that ministers' proposed code on alcohol sales "will be viewed by many with open disbelief".
This is another blow for the drinks industry, which is braced for a further increase on alcohol duty in the UK of 2% above inflation from March this year.
Producers, retailers, pubs and suppliers in the UK are not alone, however. Tax rises on alcohol are being proposed in several countries around the world, in what is becoming a global issue for the industry.
Unsurprisingly, proposed tax hikes in the UK, which include a four-year "tax escalator" for alcohol, have been met with fierce criticism, particularly considering the economic situation.
An alliance - formed by the Wine & Spirit Trade Association, the British Beer & Pub Association, the Scotch Whisky Association, the Gin & Vodka Association, and the National Association of Cider Makers - is to submit a joint submission to the Treasury calling for a rethink, after duty leapt 17% last year alone.
"The drinks industry cannot withstand further increases in excise duty without cutting more jobs and investment," the coalition stated. Current economic conditions, the groups said, means it is the "worst possible time" for more tax rises.
The UK isn't the only country to be hit by the dreaded tax.
Earlier this month, France's parliament implemented a wine and spirits tax that added around EUR0.7 to a bottle of wine and increased spirits prices by 23%.
Members of the industry described the new tax as "catastrophic", particularly because it will increase in line with inflation.
Celine Clerc, of CANOC, the confederation for AOC wine producers, told just-drinks: "This year it is a question of EUR0.7, but if inflation continues as it is, in ten years time it will be a 15% increase. And it comes from a president who promised to lower taxes on wine."
Not surprisingly, the original announcement resulted in nationwide protests against a government dubbed "hostile to wine".
And it doesn't end there.
A number of US states are proposing tax increases on wines and spirits this year in a bid to fight the effects of the recession and state budget deficits.
Kentucky and Arkansas legislators proposed tax increases last week, joining states like New York and California.
According to an article in Wall Street Journal, Peter Cressy, CEO of spirits industry body Discus, acknowledged it "will be an extremely tough year" to stop state tax increases.
So far, Discus is aware of tax-increase proposals in around ten states, and it expects the idea to spread to as many as 30 more by the end of the year.
California governor Arnold Schwarzenegger, meanwhile, has incurred the wrath of the region's winemakers with his proposal to raise alcohol excise taxes by five cents a drink from 1 February.
Wine Institute president and CEO Robert Koch slammed the plans, saying that raising the excise tax would "depress wine sales, eliminate jobs and result in winegrape acreage being pulled out of production".
A subsequent letter to the governor, seen by just-drinks, stated: "The current excise tax increase proposal for wine would cause great injury to an industry that contributes so much to the state economy and is recognized as one of our state's signature industries."
Koch stated that, what is referred to as a "nickel-a-drink" is simply a euphemism to disguise a measure that would raise the state's wine excise tax by 640%.
"California's wine excise tax would soar from $.20 per gallon to $1.48 per gallon," he said, adding that the proposal would raise the tax on wine from four cents for a 750 millilitre bottle to 29.6 cents.
Policy makers have couched many of the tax rises as a way of encouraging responsible drinking. Indeed, a government-commissioned study in the UK, completed by the University of Sheffield, recently found a direct link between price and alcohol consumption.
Cynics say tax rises are intended to paper over cracks in budget deficits and that raising prices will not target alcohol abuse effectively.
In May last year, the excise on RTDs in Australia was increased from A$39.36 per litre of pure alcohol to A$66.67, with the federal government saying that the move was aimed at curbing binge drinking among teenagers.
John Pollaers, president of Asia Pacific Diageo, attacked the decision, claiming that it was "probably based on the more immediate needs of the Government than a long-term view on taxation".
Just when it seems nobody is escaping the dismal tax hike, news today from Russia's Izvestia daily, tells of a tax cut on the national tipple.
The head of the new state alcohol agency - gleefully dubbed the "ministry for vodka" by the press - is advocating cutting taxes on vodka in a bid to make it "more accessible".
Igor Chuiyan, the former head of state alcohol monopoly Rosspirtprom, has been named to head the new federal agency for alcohol market regulation (Rosalkogol).
It seems Chuiyan is advocating slashing the tax on a litre of pure alcohol from 190.8 roubles (R59.55) to 100 roubles. This would mean that the tax on 500ml of vodka would be cut to about 20 roubles from the current 38 roubles.
Good news for the Russians, who have reportedly been cutting down their purchases of vodka during the economic crisis and resorting to homemade spirits, known as samagon.
Policy in Russia certainly appears to going against the global grain, however.
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