Wednesday, 15 February 2017

Sloping pitch

The British system of alcohol duty is a confusing dog’s dinner. There are four completely different tax regimes for beer, cider, wine and spirits, and arguably a fifth for that bizarre taxman’s invention “made wine”. Beer and spirits are taxed by alcohol content, but cider and wine are taxed at a flat rate. The same amount of alcohol in different drinks can attract a widely varying level of duty.

Surely the time has come, as Christopher Snowdon argues, to sweep all this away, and introduce a single, flat-rate, across-the-board level of duty per unit of alcohol. On the face of it, this sounds like a very sensible and attractive idea. However, there is a significant drawback. In practice, it would end up discriminating in favour of producers of stronger drinks, especially spirits, because they are cheaper to distribute and store and, at least at the bottom end of the market, cheaper to produce than beer and wine.

“Well, you would say that, Mudgie, because you’re overwhelmingly a beer drinker.” Of course, but I’d say that a fair system would be one that, broadly speaking, ensured a relatively level unit price to the drinker at the point of sale for mainstream products. And, while there are perils in the excessive consumption of all kinds of alcoholic drinks, you can do yourself serious harm more swiftly and easily drinking spirits than beer or wine. A tax regime loaded in favour of spirits would not be a good idea. It could also be argued that brewing and winemaking provide much more employment and general economic stimulation than distilling.

Yes, there is a strong case for making alcohol duties simpler and more consistent. But there are good public policy reasons for stronger drinks bearing a heavier rate of duty per unit. Remember Hogarth’s comparison of Gin Lane and Beer Street?

7 comments:

  1. I don't find it confusing. Brewers are used to their system, distillers theirs, etc. Taxing units of alcohol is supported by the anti-alcohol lobby and is yet another attack on drinking.

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    1. People professionally involved in each sector may be familiar with it, but that doesn't mean it isn't confusing to an outsider. It's certainly not something you would design given a blank sheet of paper, and there's no logic whatsoever to taxing beer and spirits by alcohol content, but cider and wine at a flat rate by volume.

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    2. But why does the system need to be understood by anyone outside the industry? The drinks trade certainly haven't asked for changes, apart from the usual calls for reductions. Any changes are a major opportunity for anti alcohol campaigners to drive another nail in the drinking coffin. Be careful of what you wish for!

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  2. The Blocked Dwarf15 February 2017 at 23:56

    I recall from my O level History that the reduction in gin drinking was more to do with other factors than the Gin Act itself. The original Gin Act , which was pretty much prohibition by any other name, went the way of all prohibitions and , I suspect buyt haven't checked, the drinking of gin actually increased. Also being a smoker I have a dislike of the whole idea of 'sin tax' , of using obscenely high duty to control behaviour. IMNSHO it tends to make the underlying problems worse not better. Witness the recent Health Nazi hand wringing about Smoking parents making their children go without food so they can afford their smokes. Totally ignoring the fact they were the ones who insisted a pack of fags cost such an eye bleeding amount.

    While reading the Wiki on Hogarth's etchings I ran across a quote by Charles Dickens , who says it far better than i ever could: "Gin-drinking is a great vice in England, but wretchedness and dirt are a greater; and until you improve the homes of the poor, or persuade a half-famished wretch not to seek relief in the temporary oblivion of his own misery, with the pittance that, divided among his family, would furnish a morsel of bread for each, gin-shops will increase in number and splendour."


    Just my 2d's worth.

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    1. Using a "sin tax" to control bad behaviour implies that you don't mind rich people, to whom the tax is a trivial amount, behaving badly. Something I find distasteful. If you really want to limit the amount of alcohol drunk, ciggies smoked, sugar imbibed, then the sure way to do it is rationing using non transferable coupons.

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  3. A level playing field would be the flat tax being proposed.

    Currently some forms of alcohol are given a handicap, for a myriad of reasons.

    There is the Hogarthian view that beer & wine are better for society than hard spirits. There is economic protectionism as favouring domestic producers in this way is still allowed. It's how the French favour domestic wine production. There is also special pleading, with some lobbyists being more successful than others and some tax breaks being politically popular. You can ramp up all manner of taxes, personal, business, energy & wealth but get good headlines with 1p off a pint of beer.

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  4. I think a system of tiers that increase with %ABV that is applied equally to all alcoholic beverages would be the most logical compromise. Stronger drinks should be taxed more per unit, because they cause the most costs to society.

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