Leading drinks company Diageo Great Britain has today outlined a new approach to alcohol taxation in response to HM Treasury’s “Review of alcohol taxation and pricing”.
As part of its submission, Diageo has proposed a staged reform of excise duty on the basis of full equivalence between all alcohol types, so that a unit of alcohol in spirits, wine, beer, cider and Ready to Drink (RTDs) is taxed at exactly the same rate.
Diageo has suggested that the simplest way to implement this would be to hold spirits duty at its current level and use the RPI+2% alcohol excise duty escalator to move other categories of alcohol up to the level of spirits duty over time.
Simon Litherland, managing director, Diageo Great Britain, said: “We strongly believe that alcohol excise duty is, and should remain, solely an instrument for raising revenue.
“Our recommendation to the Treasury is the fairest and most transparent way to approach taxation of alcohol, it will bring revenue to the Government and will mean that the more alcohol in the drink, the more tax it will pay.
“Alcohol is alcohol and we believe that people should know they are paying the same tax per unit whether it is a pint of Guinness, a glass of Blossom Hill or a glass of Johnnie Walker.”
The proposal mean a unit of alcohol would be taxed at the same rate whether it was beer, wine, cider or spirits, meaning that stronger drinks, which contain more alcohol, will pay more tax.
Equalising the tax on all alcohol would generate between £524m and £1.9bn a year for the Treasury.
A Populus survey revealed that 63% of the general public support a system in which the same amount of alcohol was taxed exactly the same regardless of the drink type.
Diageo is also using its submission to restate its opposition to the Government’s so called ‘problem drinks’ tax. Diageo’s proposal to equalise alcohol excise duty would ensure that all alcohol is taxed according to strength, eliminating the need to impose any extra taxes on any specific type of drink, for example, the ‘RTD’ category.
Contrary to common misperceptions, RTDs are not the drink of choice of either binge drinkers or under-age drinkers, since the overwhelming drinks of choice for these groups are beer, lager, cider and wine.
In a crack-down in February 2009 involving 39 police forces in England and Wales, only 5% of products seized were RTDs, versus 70% for beer and 15% for cider. Furthermore, RTD consumption has fallen by two-thirds since 2003 to just 1.3% of the alcohol market.
Litherland said: “The proposal to target a tax at RTDs is unfair, inconsistent and disproportionate to the problem. Our solution is to tax all drinks according to their alcohol content. Such an approach will mean strong drinks with more alcohol in them pay more tax.”
Source: Diageo
