On 1st August the government is changing the way that Excise Duty on wine works. I don’t intend to bore you with the nitty gritty here - please refer to our email and social media posts from 24th June for full details.
The changes will make most wines more expensive. Those higher in alcohol such as fortified wines will be a lot more expensive because they will attract a much higher rate of Excise Duty. Most sparkling wines (including Champagne) will attract slightly less Excise Duty.
Overall you’ll be paying more tax on wine and the Government are naturally hoping that this means they’ll receive higher tax receipts as a result. The latter may not actually be the case of course if people change their buying habits. Economists will point you to something called the Laffer Curve which illustrates the relationship between taxation rates and tax receipts, demonstrating that higher taxation rates are perfectly capable of reducing tax receipts. Again I won’t bore you with the detail – you can look it up online if you’re interested.
The Excise Duty changes coming into effect on 1st August will look at the precise alcoholic content of all wines and it is clear that the Government is heading towards a system where every half a degree of alcohol increase will attract a higher rate of Excise Duty. They’re cutting us a bit of slack for about 18 months with every wine between 11.5% and 14.5% being taxed as if it is 12.5% but from early 2025 this will change so that every 0.5% of alcohol will matter.
We see a number of unintended consequences as a result of these Excise Duty changes which you may like to be aware of:
These changes will encourage wines with less alcohol in them so that a lower rate of Excise Duty will apply. The taste of wine is all about balance and if a wine is 14.5% there’s a good reason for it. Producers will now be encouraged to lower that alcoholic content and there are a number of ways to achieve this:
Add water. This is something we’ve always encouraged wine drinkers to do. Not by actually adding water to their wine of course, but by drinking water as well as wine. Have a glass of 14% wine and the same volume in water and you’re halving your alcohol consumption to 7%. Producers will now be encouraged to do this for you by producing weaker wines. Expect to be disappointed.
Add grape juice. Same sort of option really in adding unfermented grape juice to lower the alcohol. The trouble here though is that the grape juice will contain unfermented natural grape sugars which will make the wine sweeter and there’s always the risk of a secondary fermentation. Expect to be disappointed.
Pick grapes earlier when they are less ripe. On the face of it this looks attractive but again grape ripeness is all about balance so expect to notice a bit more acidity. That could be counteracted (add alkali – remember O Level Chemistry?) but will come at a cost. You might as well pay the extra tax and have something natural made well.
Remove alcohol. There is a process used to make alcohol free wines called Reverse Osmosis (again by all means look it up) which will remove alcohol and this may work in taking wines down a couple of degrees, but again it costs so you could argue that you may as well pay the extra tax.
It is possible that producers may simply play fast and loose with their labelling knowing that if they label something as 11.5% instead of 13% it makes the wine less expensive (from 2025). How much testing and enforcement will the government agree to fund here do you suppose?
It is quite common for the same wine to move up or down in alcoholic content from vintage to vintage so we will be in a situation where each vintage will potentially have to be repriced to take account of the varying Excise Duty. The new system means heaps more admin for us anyway and this will just add to it.
Producers and importers are already working hard to keep alcohol content of their wines down as much as possible but we foresee supermarkets creating a new range of “wine-based drinks” which will look like wine, be promoted as wine, and sold alongside wine but which have been altered to land at below 10.5% alcohol so that they are less expensive, or more likely sold at the same price as wine for more profit. Retailers whose customers shop mainly on price will probably embrace such products. Customers who focus on flavour will probably be disappointed.
All in all there are a number of unintended consequences that the Excise Duty changes are likely to create, and probably more that nobody has even though of yet. The bottom line though is that great wines will still be available, it’s just that you’ll have to pay a bit more for them and there’s nothing we can do about it.