Varying the rate of VAT between the on and off-trade could help to reduce the negative impact of cheap alcohol without punishing pubs, argues Dr Nick Sheron of Southampton University. Sheron explores the idea in a BMJ article: Vary VAT on alcohol: a more palatable way to achieve minimum pricing?
Sheron says that although minimum pricing would be effective in addressing cheap off-sales without punishing pubs, he recognises that 'the UK government is not keen on the concept'. As an alternative, variable increases in duty to deliver an effective minimum price of 40-50 pence per unit could be offset in pubs by reducing the level of VAT. Varied VAT levies exist for other food and drink, for instance more VAT is charged to drink coffee on a premises than to take away. Sheron suggests the reverse of this could be applied for alcohol, for instance reducing the VAT for on-sales from 20% to 12%.
The premise still relies on raising the overall cost of cheap alcohol to deter retailers selling alcohol below a certain unit threshold - which largely applies to off-trade sales. Modelling by the University of Sheffield exploring the link between price and harm estimated minimum unit pricing could save thousands of lives and reduce other health and social costs. The IFS recently urged the Government to increase tax on alcohol to achieve pricing increases, as minimum pricing would transfer an estimated extra £700m revenue to retailers and producers. Not surprising that Tesco have supported minimum pricing, Sheron suggests.
Sheron also questions the proposed below cost ban, which has been subject to debate over a definition and whether any real impact would be seen on cheap sales; "No form of 'below cost' ban can deliver a price of 40 pence a unit without swingeing increases in duty on alcohol."
Currently an HM Treasury review into alcohol and taxation is taking place. However Sheron indicated that when the idea was recently suggested, the Treasury "were not immediately keen on the concept of changing VAT but produced no concrete reason why it could not work." The Home Office plan states "Pricing options must be enforceable, compatible with EU trade law and easily implemented by business."
See reports in the Guardian, Telegraph, and a Publican story quoting support from pub industry bodies the BBPA and CAMRA.
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