Monday, March 29, 2010

Alcohol taxes and cider

A big fuss being kicked up on the rise in duty on cider; I'm not a big drinker but I do like cider so let's take a look at how it breaks down for the consumer. Here are the raw figures as supplied by HMRC

Alcohol Duties2009-10 2010-11
Rate £ per litre of pure alcohol
Spirits 22.64 23.80
Spirits-based RTDs (ready to drink) 22.64 23.80
Wine and made-wine: exceeding 22% abv. 22.64 23.80
Rate £ per hectolitre per cent of alcohol in the beer
Beer 16.47 17.32
Rate £ per hectolitre of product
Still cider and perry: exceeding 1.2% - not exceeding 7.5% abv. 31.83 36.01
Still cider and perry: exceeding 7.5% - less than 8.5% abv. 47.77 54.04
Sparkling cider and perry: exceeding 1.2% - not exceeding 5.5% abv. 31.83 36.01
Sparkling cider and perry: exceeding 5.5% - less than 8.5% abv. 207.20 217.83
Wine and made-wine: exceeding 1.2% - not exceeding 4% abv. 65.94 69.32
Wine and made-wine: exceeding 4% - not exceeding 5.5% abv. 90.68 95.33
Still wine and made-wine: exceeding 5.5% - not exceeding 15% abv. 214.02 225.00
Wine and made-wine: exceeding 15% - not exceeding 22% abv. 285.33 299.97
Sparkling wine and made-wine: exceeding 5.5% - less than 8.5% abv. 207.20 217.83
Sparkling wine and made-wine: 8.5% and above - not exceeding 15% abv. 274.13 288.20

Simple yes ;-) Well no of course not this is the government we're talking about here. So let's play with some examples. Imagine a 1 litre bottle of pure alcohol, we'll class it as a spirit so it attracts duty under the first bold heading which makes it £23.80. If it was a 1 litre bottle of whiskey at 50% ABV then the duty would be half that £11.90; if it was a half-litre of pure alcohol it would again be £11.90.

So now let's take our same 1 litre bottle of pure alcohol and call it beer; that appears under the second bold heading, hmm hectolitres that's 100 litres. So keeping it simple let's up the bottle to the 100 litre mark; that makes the duty as with the spirit at the stated figure of £17.32, correct? Wrong because it's also by "per cent" and it's pure alcohol that would make the duty £1,732.00. Drop it back to our simple 1 litre bottle and that in turn drops it back to £17.32. Again we don't get 100% bottles of beer so 1 litre of beer at a strength of 6% and we get £17.32/100*6 or £1.04

[Note that with spirits it's assumed a starting point of 100% alcohol, but with beer you start with 1%; that's why if you have a 40% spirit you multiply by 0.4 (40/100) but with beer you'd multiply by the full 40 (40/1))

Now onto cider, and wow that's seems complicated but it's less so than all the others. Note that it's based on a hectolitre of "product" so if we take a 100 litre bottle of cider at the minimum of 1.2% the duty is simply £36.01; take the same bottle of 7.5% and it's still £36.01.

So unlike spirits or beer both wine (below 22%) and cider are split into alcohol bands rather than than taxed on the actual alcohol content.

So what if you took a pint of beer, a pint of cider, and a pint of wine, what are the results?

So it's still cheaper (tax-wise) to drink cider except if you pick the sparkling variety at which point the higher strengths jump to the equivalent of drinking wine. The justification given is "These are considered to be competing products of similar strength and are often sold in the same sort of packaging." Yeah right so let's watch the sales of sparkling cider plummet and the sales of still cider rocket.


Dan H said...

This kind of answers a question I was wondering about recently: if I buy a pre-mixed cocktail (you can get cans of G&T, and Pimms and lemonade, and probably others), does Mr. Darling get more of my money than if I buy a measure of gin (or Pimms or whatever) and a mixer? If the rate for spirits and pre-mixed drinks is based on the amount of alcohol, rather than the total volume of drink, I guess not.

FlipC said...

Though I'm sure if that wasn't the case it could be argued that it's the quantity of gin rather than tonic that counts in a pre-mixed bottle.

In theory if creating this tax from scratch I'd do it on a simple per alcohol per litre basis similar to beer, but to discourage higher rates use the same banding as with wine and cider.

I'm sure the complications arose due to pressure from the various manufacturers 'Our 6% beer has the same duty as a 6% wine; that's not right!' Why not? It's the alcohol that counts.

Orphi said...

Take heart. At least it doesn't use the same horrifyingly-broken backwards-compatible pea-soup that is AJAX. :-P

Now that's what I call unecessarily complicated…