• Diageo wants level playing field for beer, wine, spirits
  • Continues to reject link between pricing and consumption
  • Would consider support for limited ban on 'below cost' sales  
Diageo wants level playing field on UK drinks tax

Diageo wants level playing field on UK drinks tax

Diageo wants duty tax on beer, wine and cider in the UK to be raised to the level of the tax on spirits, the drinks giant has told the Government in a consultation on alcoholic drinks pricing.

Diageo said at the weekend that the Government should reform the excise tax system so that all drinks are taxed by alcoholic unit and at the same rate. The Smirnoff, Johnnie Walker and Guinness owner said that this would mean a fairer playing field and could generate between GBP524m (US$808m) and GBP1.9bn per year extra for the Government.

The UK Treasury is in the middle of a public consultation on alcohol taxation and pricing and Diageo's statement marks the drinks giant's official entry into the debate. 

"Our recommendation to the Treasury is the fairest and most transparent way to approach taxation of alcohol," said Diageo Great Britain's managing director, Simon Litherland. "It will bring revenue to the Government and will mean that the more alcohol in the drink, the more tax it will pay."

But, Diageo remains cautious on the UK Government's plan to ban sales of drinks at 'below cost' prices in order to curb excess consumption.

"We’ve always maintained that we do not support pricing interventions on alcohol, because there is no evidence globally that it is an effective measure in reducing alcohol-related harm," said the firm. "Increasing the price of alcohol, by whatever means, also unfairly penalises those who drink responsibly."

Diageo reiterated, however, that the Government's proposal to ban sales of drinks below the cost of duty and value added tax "seems to be a response to public concern that is worthy of closer examination". 

The issue of pricing has split the UK drinks industry. Many of those in the on-trade favour minimum pricing or, at the very least, a tougher definition of 'below cost' in order to stamp out discount deals on alcohol in the off-trade.

Meanwhile, the Wine & Spirit Trade Association believes 'below cost' should equate to no more than duty plus value added tax (VAT); a stance recently adopted by the country's second largest supermarket, Asda Wal-Mart.

The Government is expected to announce final plans before the end of 2010.

Read the just-drinks blog on Diageo's stance and comment on the drinks industry's position.