Monday, 27 January 2014

Fun Online Polls: Beer duty, VAT, house prices and wages

The results to last week's Fun Online Poll were as follows:

What does the government get more of if a pint of 4% beer is sold in a pub for £3.00?

Beer Duty -34%
VAT - 66%

Well done to the two-thirds of you who got it right: the Beer Duty is 43p and the VAT is 50p.

So why does the pub industry keep complaining about Beer Duty and only very occasionally about VAT? If we cheerfully gloss over the effect of the smoking ban and assume that the main competition for pubs is people deciding to buy booze in the supermarket and drink it at home, if the pub industry were well advised they would only complain about VAT and if anything they would support an increase in Beer Duty.

That would enable pubs to reduce their selling prices - whether for booze, food or soft drinks - and it would push up the selling price of booze in the supermarkets, thus tilting the playing field back in their favour. Ah well.
This week's Fun Online Poll is based on a slogan coined by DBC Reed in the comments earlier:

"You can have high house prices or good wages, but not both"

A bit simplistic yes, but ultimately there is a trade-off and it is one of many choices a society has to make.

Choose here or use the widget in the sidebar.


Physiocrat said...

I prefer to brew my own, then I can make it consistently and the way I want, and try experiments with fancy ingredients such as American hops.

Kj said...

I remember an article that said something tangential, that excise taxes per unit are better for small producers, here it is:

The excise tax on alcohol makes up a much smaller portion of the overall price of great beers like those made by Three Boys, Emersons, Renaissance, or Epic than it does for the dreck my students drink. Suppose that these student beers sell for $1 per bottle while good beer sells for $5 per bottle. A doubling of the excise tax from about $0.40 to about $0.80 would, in the limiting case of full pass-through (assuming an inelastic demand curve), increase the price of cheap beer from $1 to $1.40, a 40% increase, while good beers would increase from $5 to $5.40, an 8% increase. If anything, good beer becomes relatively cheaper with an increase in the excise tax. It's absolutely more expensive, but the price ratio between the two beers decreases: instead of being 5X more expensive, it's then a bit less than 4X as expensive.