The Gin and Vodka Association (GVA) has expressed its serious concern at today’s announcement by the Chancellor that he intends to proceed with plans to raise taxes on alcohol this year. The news brings further misery to hard-pressed consumers and threatens more job losses in a sector already facing record numbers of business failures, pub closures and worsening trading conditions.
Today’s Budget raised alcohol taxes by 2%. If the tax escalator on alcohol continues for the next three years as scheduled, it will mean that duty on alcohol will have been raised by around 40% by the time of the London Olympics.
In the first ever joint industry Budget Submission, the GVA joined other major drinks industry trade associations in warning that a total of 75,000 jobs would be at risk if the plans to increase taxes further went ahead.
The impact of today’s announcement will be more severe than anticipated because the Treasury based its calculations on a notional zero inflation rate rather than the current forecast for deflation of minus 3%.
The GVA will continue to seek an end to the four year tax escalator. Importantly, it is also seeking reversal of the duty increase announced in last year’s Pre-Budget Report, once the temporary VAT reduction it was designed to offset ends in January 2010.
Edwin Atkinson, Director General, said: “The Government had announced a tax escalator for our industry of 2% above the rate of inflation (RPI). Now they have admitted that in actual fact, there is deflation. So they have changed the rules in order to apply a further tax increase to the drinks industry. Due to the price sensitivity of spirits, these tax hikes are unlikely to deliver the revenues originally forecast by the Treasury.”