When Hong Kong scrapped all taxation on alcohol sales in 2008, it sent the price of investment wine into the stratosphere. Tax cuts on wine purchases are now set to happen in India!!
The trade deal could result in India finally being opened up to the wine investment market, with a consequent leap in demand.
The abolition of tax on alcohol in China in 2008 resulted in Hong Kong becoming the world’s premier wine trading hub. Last year Sotheby’s made 52pc of total sales in Hong Kong, against 16pc in New York and 32pc in London. The total value of the sales was $85.5m (£54m).
The current trade negotiations between the EU and the Indian government have been going on for four long years but – finally – a deal looks about to be struck in the coming months. This could have a dramatic impact on the global wine industry.
Any deal would see India slash tariffs on imported alcohol in return for an opening-up of the European market to India.
Imported wines currently face a 150pc tariff in India as well as an “extra additional duty” of 4pc. This is before any additional taxes imposed by India’s individual states. These range from 30pc to more than 100pc and have made investing in wines relatively unattractive.
The new agreement could see import duties slashed to just 40pc, boosting the sale of investment-grade wine.
Comparisons have been drawn with the situation in Hong Kong in 2008, which saw the fine wine market explode after import taxes were scrapped altogether.
Like other areas of Asia, wine has hugely grown in popularity in India over the past decade, as a rapidly expanding middle and upper class scramble to get their hands on it.
Wine imports have doubled to £17.8m over the last two years and with India’s consumer markets expected to quadruple over the next two decades, the lowering of import duties could not come at a better time.
There has also been some comments that a break-up of the eurozone may boost wine investments, as people scrabble to find “hard assets” to deploy their wealth.