Progressive Beer Duty

Progressive Beer Duty is a term used to describe a beer duty system that allows smaller breweries to pay less tax on their products. The idea originates from Bavaria where such a system has underpinned the brewing industry and helped support local production. This idea encourages competition in quality and variety and supports diversity in local economies. It also encourages consumer interest and product pride which in turn helps promote cultural links.

This concept was adopted by the European Union as a derogated power so not all countries implemented the idea. The structure and its parameters provided by EU law allowed the creation of systems which suited the needs of individual states. There is, as some journalists, have suggested, no "European system" as such. E.U. law allows for a maximum discount of 50% of beer tax on production levels up to 20,000,000 litres with the provision for a stepped structure. Each country can choose the percentage and level/s of production. Germany has for instance adopted the full 20,000,000 L level which is appropriate considering the many different sizes of breweries within the country. The UK on the other hand limited the discount to 3,000,000 L creating a tightly targeted tax benefit. The interesting aspect of the U.K system is that it not only provides a discount on beer tax but also a limit to which individual companies can benefit unlike the German version where companies gain greater total monetary discounts on shrinking percentages as they grow thus in theory disadvantaging smaller companies.

The Society of Independent Brewers campaigned, without support from any other body, for a progressive duty system to be introduced in the UK, for some 21 years. Originally under the Chairmanship of Peter Austin the system adopted by the Chancellor, Gordon Brown and which was devised by a later Chairman, David Roberts, who had actively campaigned for the introduction of the system for some 12 years.

The initial level was subsequently increased to 60,000 after a few smaller family brewers joined SIBA and help influence a policy change within the Society. The UK system has been criticised for creating a "glass ceiling" which hinders expansion: the reality is that the levels adopted mean that the duty discount represents a very small percentage of the duty paid at the highest levels. It remains a system that saved the small brewing industry in the UK.

The system that was adopted in the U.S.A which stimulated the growth of micro-breweries was different in that in was a flat discount on each barrel produced.