Tax beers and wine more heavily, whisky giant Diageo tells Treasury

Published on Monday 30 August 2010 16:57

DRINKS giant Diageo has demanded an overhaul of the tax system for alcohol which would see hikes in duty for wine, beer and cider.

The intervention is the latest bid by the company to influence a review by the UK government looking at how to tackle alcohol-related problems. It comes as SNP ministers in Scotland are still attempting to push through minimum pricing.

The company, the world's largest producer of whisky, has told the Treasury that spirits are currently unfairly discriminated against in the tax system.

In a submission to a review of alcohol taxation being carried out by the Treasury and Home Office aimed at reducing drink- related social problems, Diageo has said all other forms of alcohol should be taxed at the 23.8p a unit currently levied on spirits.

And despite opposing the SNP plans for minimum pricing in Scotland, Diageo has suggested that there should be a minimum floor where alcohol is sold and an end to some promotions.

It has also challenged the belief that alcopops or ready to drink (RTD) products, currently taxed at the same level as spirits, are the cause of problem drinking. Instead, the company points to evidence that underage drinking particular centres around beer, wine and cider.

In a crackdown in February 2009 involving 39 police forces in England and Wales, only 5 per cent of products seized were RTDs, versus 70 per cent for beer and 15 per cent for cider.

As things stand, cider is only taxed at one-third the spirits rate at 7.97p, while duty for wine is 70 per cent that rate at 16.67p, and beer 73 per cent at 17.32p.

Diageo proposes an inflation-plus 2 per cent increase on all the other products until they reach the same level as spirits in four to five years.

Duty on a standard bottle of wine would go up from 1.50 to 2.14 and a bottle of beer 35p to 48p.

It argues the change of taxation would bring in between 524 million and 1.9 billion extra into the Treasury's coffers. Simon Litherland, managing director of Diageo Great Britain, said: "Our recommendation to the Treasury is the fairest and most transparent way to approach taxation of alcohol; it will mean the more alcohol in the drink, the more tax it will pay."

The approach appears to be directly opposed to the Tory idea of targeting problem drinks with extra tax.

But Scottish Conservative health spokesman Murdo Fraser said that he was pleased Diageo recognised the way to resolve the problem was through taxation.

He said: "Diageo rightly accepts the principle that the best way to deal with these issues is through reforms to the tax system, not the introduction of a blanket minimum unit price."

Scottish Labour is today set to publish its own proposals on drink and pricing. Jackie Baillie, Scottish Labour's health spokeswoman, said: "This is an interesting proposal from Diageo."

However, the Lib Dems disagreed with Diageo that tax should only be used for revenue purposes.

SNP MSP Michael Matheson said: "Diageo are simply backing the status quo - supporting proposals in the last Labour budget."

Deadline day

THE deadline for submissions to the UK government's review of alcohol taxation is today, which is also a key date in Scotland for the debate on drink pricing.

Scottish Labour is set to publish its proposals on how alcohol can be tackled through a pricing mechanism as an alternative to the SNP's minimum price.

It is understood the party will prefer using tax to control problem drinks, an approach also supported by the Tories on both sides of the Border.