I wrote a brief article as an activity for the Wset diploma course. I am publishing it here, hoping that you will find it useful. The assignment was as follows.
Have a look at the following tables on wine taxes in the USA and EU:
Wine-Searcher: USA Sales Taxes on WineWine-Searcher: EU Excise Rates and VAT on Wine
Read through the following articles which discuss wine taxes in France, UK and India:
France 24: French wine tax plans will ‘cork the industry’Bauduc Blog: Where the money goes on a bottle of wine in the UKBusiness Standard: India offers to slash import duty on wines, spirits to 40%
How do the levels of tax compare between these 3 markets? What impact do you feel these have on the local wine markets here? What impact are they intended to have?
How do the levels of taxation compare where you live/where you are taking your examinations? How does this affect the prices of wine local to you?
The levels of tax in the 3 markets of UK, France and India are different and try to answer to peculiar issues in the respective markets.
UK and France are both members of the European Union, their VAT on wine is identical (20%), but the excise rate is much lower in the latter (0.33/0.83 euros for still/sparkling wines in France and 30.07/38.52 for the same category in UK). Given that the excise rate is a tax applied on production of a good (vs sales tax which is applied to sale), a state will tend to lower it for a particular product when promoting the sector producing that specific commodity. This is what happens in France.
India situation in this case is much more complicated because, being a federation, VAT and excise will greatly vary between the governments. A report by the USDA Foreign Agricultural Service (page 5 and 6) brings the example of Maharashtra, India’s main wine producing state, where a series of taxes have been put in place to artificially rise the cost of imported wines, exempting local producers.
A very similar point can be made if we look at customs duty, which are the focus of the the article from Business Standard. UK and France (and the rest of EU as well) have reasonably low custom taxes on wine, up to euros 32.00/hl, when special agreements are not in place. This may be basically because Europe has a strong wine producing sector and does not have much to fear from non-EU producing regions. Even though Australia, Chile, USA or New Zealand can offer good value, the custom duty will always be lower (that is, zero) for french, italian or spanish wine and the transport much cheaper. On the other hand India’s custom rate is still at 150% and will decrease to 30% at best. The unwillingness to lower this barrier is easily understandable in the words of Indian wine academy Subhash Arora who, quoting the article, said: “A reduction of duties to 40 per cent across the board means opening the gate for cheap imports. This way, the Indian wine industry will perish and this will also impact the farming community”. Indian wine as much to fear from Europe, in terms of quality, price and fame. Resistance is understandable.
In Japan, where I live, the levels of taxation for wine are as follows:
8% sales tax (will become 10% next year).
For still wines, a custom tariff of 15% or 125 yen/l whichever is less, with a minimum of 67 yen/l.
For sparkling wines , a custom tariff of 182 yen/l.
For fortified wines , a custom tariff of 112 yen/l.
A liquor tax of 80.000 yen/kl for both sparkling and still not fortified wines
A liquor tax of 120.000 yen/kl for fortified wines (which are considered liqueur) +10.000 yen/kl per degrees by volume when alcoholic degree exceeds 12% (so a 15% alcohol port will be at 150.000 yen/kl).
If you think this is complicated you should give a look at the taxation for beer, which is calculated taking into account the malt percentage in the brew.
If you consider that Japan does not produce much wine by itself, this means that even a barely drinkable bottle of wine will be at 500 yen (at the moment 3.89 euros/4.21 dollars/2.81 pounds), though the majority of the wine sold will be between 500 and 1000 yen, as reported by the latest issue of Shuhan News. Compared to my home country, Italy, where for 3 euros you can by a very honest bottle, it is a very hard life for wine lovers in Japan.