MPs launch enquiry into impact of tax increases on wine and spirits' market

An enquiry into the impact of tax changes on the wine and spirits' market is set to take place this month as businesses cut jobs as a result of declining sales.

The All Party Parliamentary Group on Wine and Spirits will examine how the surge in excise duty rates on alcohol have affected the industry and will also investigate the potential impact of further scheduled tax rises.

As wine sales in the off trade and more markedly in the on trade continue to slide, major businesses in the wine sector have started to cut jobs, pointing to the harsh tax regime as a major factor in their decision. The fall in the value of the pound has been cited as an additional burden for wine and spirits importers.

Chancellor Darling's 2008 budget provided for a further increase in alcohol tax which is set to rise by two per cent above the rate of inflation for the next four years.

In November, the Pre-Budget Report also saw taxes on alcohol climb by an additional eight per cent to counteract the temporary 2.5 per cent VAT decrease, a measure that will remain until the VAT cut expires in 2010.

These tax increases could see excise duty soar by as much as 40 per cent by 2012.

Recent figures from HM Revenue and Customs have shown the Treasury is failing to meet its forecast revenue from excise duty on alcohol, missing Government targets by £137 million pounds from April to September last year.

The inquiry will be co-chaired by Andrew Dismore MP and Geoffrey Clifton-Brown MP, with Guy Woodward, Editor of Decanter,​ acting as adviser to the Group. It will take evidence from producers, retailers, wholesalers and experts on the wine and spirits industries.

The key questions to be examined include:

What impact have tax increases had on employment in the wine and spirits industry?

What impact have tax increases had on Government revenue? Will the tax escalator cause an increase or decrease in revenues?

What impact have tax increases had on the prospect for future investment by the wine and spirits industry in the UK?

What impact have tax increases had on consumer behaviour, choice and enjoyment?

The deadline for written evidence is 24 February and an oral session will be held on the 26 February in the Wilson Room in Portcullis House, Westminster. The enquiry's final report is due in March.