The Wine and Spirit Trade Association(WSTA) is urging the Treasury to cut excise duty rates on wine and spirits when it restores VAT to its standard 17.5% rate at the end of 2009.
The temporary VAT reduction was introduced in November 2008 and was accompanied by an increase in duty on wine and spirits by 8% and 4% respectively because the Treasury wanted to ensure the impact of the VAT change was broadly cost-neutral for alcohol.
But the WSTA has claimed the tax increase was not cost neutral for over 90% of the wines sold in the UK off-trade.
It said added to the “excessive” duty increase in the March 2008 Budget, the tax rise exacerbated the impact on the industry of reduced consumer spending, the adverse exchange rate and increased cost of production.
In a letter to Treasury Exchequer secretary Sarah McCarthy-Fry MP, the WSTA warns that duty rises of 19% for wine and 15% for spirits since March 2008 have contributed to job losses and cutbacks in investment, making the UK an unstable and unattractive market.
Jeremy Beadles, chief executive of the WSTA, said: “While other industries have had a helping hand during this recession the drinks industry has been hit by successive tax increases.
“With VAT rising again the reason for last November’s tax hikes on alcohol has gone and ministers should act to ensure a fair deal for the industry and the consumers we serve.”
