Nobody likes the taxman, except maybe his wife, and even that’s debatable. Over the years, to alleviate the pain of paying income taxes and make for a fairer society, governments have adopted progressive tax systems. Progressive taxes, as opposed to a flat tax, level the playing field for low earners as they pay less tax as a percentage of income than their high-earning compatriots.
In the alcoholic beverage industry, on the other hand, there exists a flat excise duty rate. All spirits, wine and beer producers have the same duty imposed on their products no matter their size. This uniform duty rate perpetuates an unbalanced industry already stacked against small producers whose spirits retail at significantly higher prices than those of larger producers. To make for a fairer industry and level the playing field, the government should allow for a progressive excise duty based on production volume.
The UK excise duty on the pure alcohol content of spirits has been set at £28.22 per litre. That means that for all 70cl bottles of gin with an ABV of 40%, the excise duty is £7.90. That duty is the same for all 70cl 40% ABV bottles of spirits no matter their cost of production or origin.
This fixed duty puts craft distillers and brewers at a double disadvantage. Firstly, their cost of goods and production costs are already higher in percentage terms than their conglomerate competitors like Diageo and Pernod Ricard who have more negotiating power when buying supplies and spend less time and resources making product relative to their craft cousins. This is similar to the way in which low earners spend a much larger percentage of their income on necessities such as food and lodging than their well-off countrymen.
Secondly, by paying the same duties as their much larger relatives, craft distillers and brewers are put on the same level as them, much like a person earning £12,000 per year would be put on the same level as someone earning £1,000,000 per year if we had a flat income tax rate.
Because we have a progressive income tax, low-earners have a better chance of moving up the social ladder as they can use more of their income to invest in income-increasing strategies such as education. Theses people gradually pay more taxes as their income increases thanks to these investments.
In the same way, with a progressive excise duty, small distillers and brewers would be able to invest more in income-increasing strategies such as marketing, gradually paying more taxes as they sell more product.
With defined tiers of production volume for distillers, just like we have defined tiers of income for individuals, a progressive duty system would level the playing field for small distillers and brewers, giving them a fair chance of competing with the huge companies that dominate the beer and spirits markets.
Ultimately, your delicious craft spirits and beers will become more affordable.