Thirty-five million fewer pints of beer were drunk in Britain’s pubs and restaurants in the quarter to September 2017 than the same period last year, a reduction of 3.6 per cent, according to the British Beer and Pubs Association. This contributes to an almost 30 per cent decline in total beer sales over the past 20 years.
With duty and VAT making up over 30 per cent of the price of a pint, the industry is calling for a reduction in duty as it seeks to reverse this trend.
It isn’t clear whether this change in drinking behaviour is due to the level of tax, or because today’s consumers are choosing to spend their money in other ways or indeed to save it by drinking at home. Or a combination of these.
Either way, duties on alcoholic drinks were forecast to raise £11bn in 2016/17 so this is big business for the Exchequer.
If this trend in beer sales continues, resulting in a reduced tax take, how will the Chancellor respond?
One route would be to broaden the tax base, either by charging duty on more products, or by reducing the tax gap, which for alcohol was estimated to be at £1.3bn in 2015/16.
To try and close this gap, new measures came into effect in April 2017, making it illegal to trade alcohol without being registered under the HMRC scheme, with penalties for both unregistered wholesalers and trade buyers who purchase from them.
Increasingly, European countries are introducing taxes and other measures to curb e-cigarettes, so perhaps this is something we could also see here in the UK.
There are calls from some to extend the sugar tax on fizzy drinks to include sweets, chocolate and fast food. However, these taxes are usually implemented to change behaviour rather than generate revenues, therefore if they are successful, there will be less tax take by design.
There were announcements last week that the maximum stake on fixed odds betting terminals will be reduced. Perhaps this is another area we could see duty increased in an effort to make them even less profitable and therefore less attractive to the betting shops.
How the Government will react to these changes remains to be seen, but one thing is clear – any changes in levies on so called ‘sin taxes’ not only increase costs for the consumer but also impact on the business which sell them.
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