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Current UK rates of alcohol duty

The table below shows the rates of duty currently levied by the UK Government on different alcoholic drinks, as of 13 March 2017:[1]

 


 

These rates of tax have a number of controversial features. First, in order to adhere to European Community Directive 92/84/EEC, beer and spirits are taxed in proportion to their alcohol content, but cider and wine are taxed according to the volume of liquid sold.[2] As a result, on a per unit basis, higher strength wines and ciders attract less duty than lower strength wines and ciders. The UK Government has expressed objections to these regulations[3], but with the country leaving the European Union it remains to be seen whether the Government will attempt to alter the structure of wine and cider duty.

Second, there are significant differences in the level of tax between different types of drink, with wine and spirits attracting higher rates of duty on average than beer, and cider taxed at the lowest rate of any drink.

These are summarised in figure 11 below:[4]

This picture has been widely criticised. For example, the Institute for Fiscal Studies has claimed that “it is very difficult to justify the existing structure of alcohol excise taxes based on the likely harm associated with consuming different types and strengths of alcoholic drinks”.[5]

The rate of duty on high-strength cider has drawn particular concern. Ciders of 7.5% ABV attract the lowest rate of duty per unit of any drink: 5p per unit, less than a third of the rate of 7.5% ABV beer (18p). This fact has been linked to the growth of the market for ‘white’ ciders, typically the cheapest alcoholic products on sale, and closely associated with underage and dependent drinkers.[6]

While many believe that the current disparity between the rates of tax on different drinks is too wide, there is less agreement on how far they should be equalised. Some have argued that all drinks should be treated the same and taxed according to their alcohol content, and that there is no justification for ‘discriminating’ (as they see it) against spirits.[7] Such arguments are bolstered by the lack of evidence that any particular beverage type is physiologically more harmful than others, independent of the quantity of alcohol they contain.[8]

However, others believe that some drinks (usually spirits) should be taxed more heavily on a per unit basis. The Alcohol Health Alliance argues that since spirits are cheaper on average to produce and distribute than other drinks, taxing them at the same rate is a bad idea as it would mean that their retail price would be lower.[9] A second argument is that stronger drinks, such as spirits, are easier to drink in greater quantities – for example, because they are more prone to ‘over-pouring’ (i.e. exceeding standard measures in their servings).[10] As a result, spirits have been linked to acute heavy ‘binge’ drinking.[11] For example, a Finnish study found that sales of spirits were more closely related to alcohol poisoning than total alcohol sales.[12] On the other hand, other studies suggest spirits can be less harmful than other products – for example, analysis of Canadian data found that only beer consumption, and not other beverages, was associated with the rate of drink driving fatalities.[13] 

Interpreting these conflicting findings is tricky for a number of reasons. Results from certain countries may not be generalisable to places with different drinking cultures. Moreover, behaviour under existing policies may be radically different to how people would act under different policy regimes. 

One response is to model the effects of different policies using UK data on prices and elasticities, as the Sheffield Alcohol Policy Model does (see below). One recent paper used the model to compare a range of different policies to the status quo including a flat rate of tax of 22p per unit across all beverage types. As figure 12 shows, this would mean reducing the rate of tax on spirits, and raising it on most beers and ciders. The analysis found that such a move would reduce overall alcohol consumption by 1.9% and consumption by heavy drinkers (men drinking over 50, and women drinking over 35, units a week) by 2.8%. This, in turn, would reduce alcohol-attributable deaths by 4.3%.[14] These effects are comparable to those of a minimum unit price (MUP), although a volumetric tax is applied to all products, whereas MUP is narrowly targeted at the cheapest alcohol favoured by the heaviest drinkers.

 

Previous: What is the relationship between taxes and harm?  |  Next: How have UK alcohol taxes changed over time?


[1] Gov.uk (2016), Alcohol Duty rates from 21 March 2016

<https://www.gov.uk/government/publications/rates-and-allowance-excise-duty-alcohol-duty>

[2] Official Journal of the European Communities (1992) Council Directive 92/84/EEC

<http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992L0084:en:HTML>

[3] EU Home Affairs, Health and Education Sub-Committee, ‘A new EU Alcohol Strategy? – Evidence (HL 2014–15 123)’, p. 196; letter dated 06/06/2016 from Lord Prior of Brampton to Lord Brooke of Alverthorpe (DEP2016-0511) <http://bit.ly/2lDr5gg>

[4] Gov.uk (2016), Alcohol Duty rates from 21 March 2016

<https://www.gov.uk/government/publications/rates-and-allowance-excise-duty-alcohol-duty>

[5] Levell P et al (2016)., Excise duties, in Emmerson C et al, ‘IFS Green Budget 2016’, Institute for Fiscal Studies, p. 223 <https://www.ifs.org.uk/uploads/gb/gb2016/gb2016ch9.pdf>

[6] Alcohol Health Alliance (2016), ‘Cheap alcohol: the price we pay’ <https://www.basl.org.uk/uploads/Cheap%20alcohol%20the%20price%20we%20pay%20AHA%20Oct%202016.pdf>; Goodall T (2011)., ‘White Cider and street drinkers: Recommendations to reduce harm’ <https://www.alcoholconcern.org.uk/Handlers/Download.ashx?IDMF=82e506be-e44d-4094-b81a-7444414ed1e3>

[7] Byrnes J et al (2012)., ‘The efficiency of a volumetric alcohol tax in Australia’, Applied Health Economics & Health Policy 10:1, pp. 37–49; Crawford I., and Tanner S (1995)., ‘Alcohol Taxes and the Single European Market’, London: Institute for Fiscal Studies <https://www.ifs.org.uk/comms/comm47.pdf>; Harford T (March 2016)., ‘These are the sins we should be taxing’, Financial Times <http://timharford.com/2016/03/these-are-the-sins-we-should-be-taxing/>

[8] Makela P et al (2007)., ‘Does beverage type matter?’, Nordic Studies on Alcohol and Drugs 24, pp. 617–31

[9] Alcohol Health Alliance (2016), ‘Our policy position on alcohol taxation <http://bit.ly/2neNtJ8>

[10] Crawford and Tanner (1995), op. cit.; BBC News (December 2009), ‘Home drinkers “over-pour spirits”’, BBC News <http://news.bbc.co.uk/1/hi/health/8434905.stm>

[11] Makela et al (2007), op. cit.

[12] Poikolainen K et al (2002), ‘Alcohol sales and fatal alcohol poisonings: a time-series analysis’, Addiction 97:8, pp. 1,037–40. See also Razvodovsky Y (2003)., ‘Association Between Distilled Spirits Consumption and Violent Mortality Rate’, Drugs: Education, Prevention and Policy 10:3, pp. 235–50

[13] Mann R et al (2006)., ‘Drink-driving fatalities and consumption of beer, wine and spirits’, Drug & Alcohol Review 25:4, pp. 321–5

[14] Meier P et al (2016)., ‘Estimated Effects of Different Alcohol Taxation and Price Policies on Health Inequalities: A Mathematical Modelling Study’, PLOS Medicine. doi: http://dx.doi.org/10.1371/journal.pmed.1001963