The British government is preparing to increase taxes on wine and in particular on fortified wines, such as Madeira, Moscatel or Porto. In the latter case, the UK is the second largest export market, worth more than €50 million. The Association of Port Companies fears that the increase in the tax burden will lead to a loss of 25% of the turnover in this market, which will mean an export reduction of more than 12 million euros. “It will be negative for everyone,” said AEVP president António Filipe.
At stake is the tax on alcohol and that, when the “Growth Plan 2022” was published in September, the UK government, then headed by Liz Truss, announced its intention to end the freeze on alcohol duty for all categories from February. extend 2023 and implement the new tax system from August next year.
The thing is, less than a month later, with the arrival of a new government – Rishi Sunak replaced Liz Truss as Prime Minister and appointed Jeremy Hunt to fund – the interest rate freeze for next year was lifted, leaving the wine sector in general and the strengthened sector in particular, very concerned. Jeremy Hunt wants to raise £600 million more a year, about €700 million. The industry doubts and guarantees that everyone will lose.
“We believe it is a measure that could have a very negative impact on exports to the UK, in which we all lose. The port wine industry loses, the British consumer loses and the English treasury loses,” defended the AEVP, which has already has tried to warn the various entities, namely the Portuguese ambassador to the United Kingdom, about the harmful consequences of the measure.
Less exports
The decision to tax wines differently depending on their alcohol content has been criticized, as the UK government, according to the AEVP, plans a 7% increase in excise duty on alcohol in a bottle of wine between 11.5 and 14.5 degrees, but which exceeds the 30% increase in the case of wines above 14.5 degrees, i.e. fortified wines and spirits.
In practice, according to António Filipe, it will mean an increase in the selling price of Port wine by a further £1.09, almost EUR 1.3, per bottle. “In the current inflationary context, this could translate into a drop in sales of fortified wines in the UK, defeating the original purpose of the measure to increase revenue for the UK treasury,” he points out.
771.7 million euros is the total value of wine exports in the first 10 months of the year, which is 1.35% more than in the same period last year. Port wine decreases by 4.28% compared to 2021.
In the case of Port, the AEVP estimates that the impact of the measure will translate into a loss of 25% of the sector’s total sales to the UK. Taking into account that the UK market buys 12 million bottles a year, for which it pays €50 million, there are three million bottles, worth €12.5 million, that could go to waste.
Contacted by DN/Dinheiro Vivo, the Instituto dos Vinhos do Douro e Porto considers it “premature” to talk about the size of the UK tax increase given the lack of accurate and definitive information, but Gilberto Igrejas admits that, in any case, it already issued a note to the guardian about the concerns of the sector. A market that is shrinking this year, with port wine exports falling by almost 24% to around 37 million euros. “The instability in the UK and the war on Europe’s doorstep did not help economic transactions at all,” admits the leader of the IVDP.
anxious companies
The Symington Group, the UK’s largest port wine exporter, is deeply concerned about the issue and 25% of its sales are destined for this market. Euan Mackay, commercial director of Symington Family Estates, does not skimp on his words: “We are very confused, perplexed even, with the choices made by the UK Government, which targets fortified wines, when this category, namely Port wine, has been part of Christmas celebrations for centuries, they are the most consumed wines,” he says.
In 2021, 50.5 million euros worth of port was exported to the British market, an increase of 7.7% compared to the previous year. A value equivalent to 12 million bottles.
The manager estimates that the British consumer will have to pay an average of 1.3 pounds more over a year, about 1.5 euros per bottle of Port. “We are talking about an increase in one year, equal to the total tax increase of the past 14 years,” he insists, noting that: “It will be a sad day when Port and other fortified wines are no longer part of the festive culture of The United Kingdom”.
Adrian Bridge, CEO of Fladgate Partnership, is also concerned and estimates that the tax increase could translate into an increase in the sale price of about two pounds (2.33 euros). “The forecasts are very hard and we don’t know what the reaction will be from consumers, who have other inflationary pressures to worry about, and we must remember that port is not a basic necessity,” he emphasises.
ViniPortugal’s president admits it is affecting exports, saying this is “bad news” for Port, Madeira and Moscatel wines. Frederico Falcão assumes “some hope” that the tax increase, “harmful to those who export, but especially to those who consume wine in the UK, will not take place”.
Ilídia Pinto is a journalist for Dinheiro Vivo
Source: DN
