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Wine duty critic has little idea of industry’s history

Dear Sir,

I have read with dismay the letter written to you by “Anon, Warwick”, published in The Royal Gazette on March 24, with the headline “Wine duty calculations way off the mark”.

Tragically, your correspondent would appear to have little idea of the background and history of wine duties in Bermuda.

Some of your readers may recall that, supported by a few other wine lovers, I founded the Bristol Cellar in 1962.

At that time, the import duty on wine was 70 per cent ad valorem. This enabled lower-end wines to be sold at modest prices, as they still are — indeed some sell at retail for less than $9 a bottle. But finer wines, with the 70 per cent ad valorem duty, had to be sold at astronomical and, therefore, prohibitive prices.

Mal Gosling, in the 1960s and 1970s the president of Gosling's, and I spent six long years in negotiations with the Government to try to persuade it to understand the economics and negative impact of such insane wine duties.

During this period, there was a global trend towards increased wine drinking, particularly in the United States, where most of our visitors and tourists came from.

Aided by Mal, I worked tirelessly to try to convert Bermuda drinkers from their rum and ginger beer to the occasional glass of wine as an aperitif. And then to enjoy a glass of wine with dinner several nights of the week.

At that time, we became the leading supplier of fine wines to hotels and restaurants. Before I started the Bristol Cellar, the restaurant wine lists were sparse, to say the least. And there were virtually no fine wines listed. In the early days, I did not understand this. But I pretty soon discovered that to include fine wines on restaurant lists was a non-starter because of the high duty component.

Your correspondent gives numbers and percentages in his letter. And on the face of it, some look as if they may make a little sense.

But it must be recalled that in those days, there was only one revenue “pillar” — tourism, although offshore business was solidly building.

So, from a wine price-positioning point of view, the selling prices of wines on hotel wine lists was key. Nothing has changed.

The upshot was, with the wine duty at 70 per cent ad valorem, it was either not possible to include fine wines on restaurant lists, or they were listed at prices so astronomical that tourists would be sure that the Bermuda hotels were ripping off the visitors. This was incredibly bad PR for Bermuda. For example, a bottle of Ch. Mouton Rothschild, of a decent vintage, might have sold in a fine restaurant in New York for $200 a bottle. In Bermuda, the identical wine may have had to be listed at $400 or $500 a bottle. Rip-off? No, insane wine import duties.

So Mal and I researched extensively the wine duty structure of scores of other countries around the world and, guess what, nearly all such wine duties were “specific” — in other words, a fixed dollar rate per litre. Virtually none was ad valorem.

We then did projections for the Government for specific wine duties at various dollar points per litre, to seek to grow the net revenue from wine duties over what was being received into the government kitty from wine duties.

We made recommendations to the Government of what we deemed the optimum duty per litre and, at the very next budget, in its extreme wisdom, the government committee went for our proposal. And, guess what again, wine sales rocketed and the restaurant and hotel owners were able to list fine wines at prices comparable to, or even lower than, their counterparts in New York or Boston. This meant that the sommeliers were no longer abused by visitors for ripping them off and Bermuda's reputation as a reasonably priced, if upper-end, resort was restored. And the Government was thrilled that revenues from wine duties climbed and continued to climb annually for the next 30 years.

The wine sales in restaurants and hotels became, for the first time, a respectably profitable component of the overall F&B effort. So, in a nutshell and based on a 50-year history and experience of wine duties in Bermuda, I am confident that the Government, at the moment, has the duty structure on wine just about right, taking into account the sometimes opposing views of all interested parties, and at the same time seeking to maximise the total revenue from such wine duties.

And lastly, your correspondent's concept of taxing yachts, mega or mini, on the supplies, including wine, they happen to have on board on arrival in these waters is so preposterous and insulting, to say nothing of being impracticable, that words fail one.


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Published March 29, 2017 at 9:00 am (Updated March 29, 2017 at 1:29 am)

Wine duty critic has little idea of industry’s history

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