British Pubs Argue for Freeze in Beer Duty

February 10, 2011

Complaints over high alcohol taxes—or “sin” taxes in general—are not limited to the U.S. Last week the British Beer and Pub Association issued s statement arguing for a freeze in the beer tax. From Tax-News.com:

A freeze in beer duty and the scrapping of the previous government’s controversial beer duty escalator in the Budget are needed to restore growth in brewing, pubs, and the UK hospitality trade, and boost the wider economy, according to the British Beer and Pub Association’s (BBPA) Budget recent submission to the Treasury.

Scrapping the duty escalator in March would save over 10,000 jobs, mostly in Britain’s pubs, according to analysis by Oxford Economics. It would also generate an extra GBP40m in tax revenues for the government, stemming the tide in pub closures, still running at 29 per week.

The BBPA says that Britain’s huge hospitality sector, of which pubs are a key part, could be an engine for economic growth and new jobs, “if the government would only abandon the destructive tax policies of recent years.” Instead, the current government plan, which could result in a 7% rise in beer tax via the ‘escalator’, could add over five pence to the price of a pub pint.

Of course any trade association will prefer tax treatment that benefits its industry, but aside from the the role of pubs in economic growth and job creation, neutrality is an important principle of sound tax policy and is the best argument for lowering or freezing the beer tax: Certain goods and services should not be singled out for high tax rates because they are viewed as unhealthy or “sinful.” Since taxes pay for general public services, tax revenue should be raised with low rates and broad bases rather than with targeted, high taxes on “sinful” goods like alcohol and cigarettes.

Taxes also should not be used to micromanage behavior. The British Beer and Pub Association may have a good point about beer bearing a heavy tax burden relative to spirits, but its suggestion to change the tax rates of various types of alcohol to encourage consumption of some types over others is not sound tax policy:

In its submission the BBPA says that beer has endured an increasingly heavy tax burden in relation to spirits in recent years and therefore beer duty should be reduced in relation to spirits to encourage the consumption of lower-strength drinks, as in Ireland.

More on alcohol taxes: blog posts and research.


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