Proposed alcohol tax reform in the UK: Implications for wine-exporting countries

A proposal to reform the United Kingdom’s excise duty on alcohol is under consideration during 2022. The proposal would change the tax base from volume of product to volume of alcohol, which would see a fall in the tax on sparkling wine (by about one-fifth), a rise in the tax on fortified wines of 18% ABV (by about one-sixth), and table wines with more (less) than 11.5% ABV would become dearer (cheaper). With taxes on most beers to be unchanged and taxes on spirits to be lowered slightly, the pattern of UK wine consumption and imports would alter considerably. This article draws on a global model of national alcoholic beverage markets to estimate the likely bilateral trade effects of this proposed reform to UK excise duties. It compares them with the trade effects of the UK’s first two bilateral free trade agreements (FTAs), following the post-Brexit EU–UK Trade and Cooperation Agreement, which allow Australian and New Zealand vignerons tariff-free access to the UK wine market. Those two FTAs are estimated to cause the UK to import far more wine than is lost by the proposed changes in UK excise duties.