If you stroll around London for a while you are likely to come across a scene like the one shown here. An old building with its windows bricked up. Sometimes it’s one or two windows. Sometimes they are all covered over. No sunlight gets in.
Ain’t No Sunshine …
The reason the owners decided to keep the sun out was the window tax, an attempt by 19th-century government in England and then later in Scotland to tax the rich in a manner less invasive than an income tax.
What could be better than a window tax? Big houses with many windows were indicators of wealth and simply counting the windows (with exemptions for the humble cottages of the poor) an arbitrary straight-forward way to assess tax liability.
This was an era when revenue-craving governments were willing to go to almost any length to raise funds through specific excise taxes — think about the advice to “declare the pennies on your eyes” in the Beatles tune “Taxman” (see below for music video). Rather than one big tax source, dozens of smaller excise taxes were imposed.
The Taxman Cometh
But the tax authorities didn’t count on quite how much the English hated to be taxed and, obviously, many of them were willing to wall-up their windows and contentedly sit in the dark in order to escape the despised taxman’s assessment.
This bit of fiscal history is prompted by what might be considered by some to be a new tax on sun light, but this one collected via wine instead of windows. Galileo famously said that wine is sunlight held together by water, so what better way to tax sunshine than through wine. Or at least that’s what some people are saying, according to a recent article in the Financial Times.
Britain is slowly adjusting to its post-Brexit status and part of that means transitioning away from EU rules on the taxation of alcoholic beverages. Under EU regulations, which are still in effect, still wines and fortified wines are taxed in three bands according to alcohol by volume (abv), with sparkling wines in a further higher-rate band.
Let the Sunshine In?
Britain’s chancellor has proposed a new 27-band system with the rate rising every half percent of abv. The complexity of the plan suggests high compliance costs, don’t you think, and would seem to invite a certain amount of gaming of the system. The abv of that wine in your glass may or may not be the same as the number of the label — a certain amount of rounding up or down often takes place — and this will matter more if fine-grained tax consequences are at stake.
I’ve heard that the chancellor’s office says that it is really just one band with 27 steps., not 27 bands. Good to know. I’m sure that makes compliance much simpler!
Some members of the British wine trade go further, asserting that this amounts to a “sunshine tax.” The argument is that producers in sunnier regions like Australia can’t help producing riper grapes that yield higher abv levels while wineries in cooler climates, like the Mosel, naturally produce wines with lower abv.
This is true to a certain extent, although wine producers certainly have their secret ways of increasing abv when they want to and reducing it when that makes sense. No one in California brags about de-alcoholization, for example, but people tell me it happens all the time. Part of a batch of wine goes through a process to extract alcohol, they say, and is then blended back into the tank to bring the percent of abv down.
One winemaker friend talks about using “Jesus units” to accomplish the same end more directly. This process involves water and a hose. The result turns water into lower alcohol wine. A miracle!
Australian producers are particularly upset. Australia and the UK have signed a free trade agreement which will modestly reduce tariffs on Aussie wines exported to Britain. The “Sunshine tax,” which would apply to most wines from Oz, more than offsets any advantage from the new agreement.
Let me know if you see any wineries bricking up their windows. They might do that if they don’t want the world to see how they are lowering the alcohol levels in their wine!