Alcohol duties raised but net tax decrease!

Increase in duties not enough to offset the cut in VAT.

In the 2008 Pre-Budget Report the government has pledged to raise the level of duty on all alcoholic products.

This change will come into place from 1 December 2008.
With VAT to be cut from 17.5 % to 15%, Chancellor Alistair Darling said
that duties would be increased “by an amount which should keep the
overall cost to consumers the same this year.”

It was initially announced that the rise in duties would
be in the order of 8% on all alcoholic products. However, the Chancellor
later admitted that he had made a mistake in claiming that this rise in
duty on sprits would leave the cost at the same level for the consumer.
For this reason, a further order was tabled whereby the duty on spirits
was to be raised by 4%.

The IAS has calculated that the tax changes to VAT and
duty are not tax neutral. The overall level of taxation levied on
alcoholic products will be mainly lower following the changes. To give
some examples of the likely effects of the tax changes, the impact on
selected drinks is as follows:

Product 

Typical unit

Current price

Net decrease in tax

 Beer (4.1% abv)

 pint

£2.70

3p

 Wine

 75cl bottle

£5.50

0p

 Cider

 2 litre bottle

£2.50

1p

 Whisky

 70cl bottle

£15.00

8p

 
The Chancellor’s wider tax measures have been called the
“most transparently redistributive budget statement of the past 30
years” by the Financial Times, which should help assuage concerns about
the regressive nature of alcohol duty increases.

For more information on the pre-budget report, click here.