SWA renews duty cut calls

Related tags Scotch whisky association Scotch whisky industry Tax Scotch whisky

The Scotch Whisky Association has begun its annual campaign for a
cut duty levels on whisky and other spirits, calling for a 4 per
cent drop this year.

If it's February, then it must be time for the annual pre-Budget negotiations in the UK, and as usual the country's biggest food and drink exporter - the Scotch whisky industry - is lobbying hard for a cut in duties.

The Scotch Whisky Association has often partnered the UK and EU governments in lobbying other countries (such as Chile or South Korea) where Scotch and other imported spirits have been taxed at a far higher rate than local drinks, but at home the SWA remains at loggerheads with Chancellor Gordon Brown over his refusal to reduce the high duty rates.

For several years now, the SWA has put forward the suggestion that a cut in duty rates would not in fact lead to any long-term decline in government revenues, and the government has responded by freezing duty rates on Scotch and other spirits. But this year the SWA is looking for more just maintaining the status quo.

"Spirits tax is so high that government economists believe a cut in the duty on Scotch could boost revenues,"​ the SWA said in a statement. "Scotch is taxed at least one and a half times higher than the same amount of alcohol served in beer and wine, and in recent years the government has taken steps to correct this historical distortion of the alcoholic drinks market. The SWA will urge the government to maintain the momentum with a 4 per cent duty cut this year."

The SWA met last week with government officials to put forward its case for a duty cut, and the SWA's chairman, Ian Good, said he hoped the negotiations would be fruitful. "Resuming the policy of reducing tax discrimination against spirits would be a win-win situation. Recent Budget duty freezes have stabilised the Scotch market, but official estimates suggest that a cut in the duty on Scotch could boost revenue. We are not looking for a tax advantage, just equality of opportunity.

"When UK manufacturing industry is going through difficult times, the 2003 Budget provides the Chancellor with an opportunity to support a home-grown industry that makes substantial contribution to the balance of trade, and supports some 65,000 jobs across the UK."

Perhaps more importantly for the SWA is the call for a complete overhaul of the way in which excise duties in the UK are structured. The Scotch whisky industry wants the government to understand the tax burden under which it operates, and in particular wants it to take action on a new policy from the Inland Revenue which means that certain taxes have to be paid before the product to which they relate is sold.

Changing the government's opinion on drinks taxes has traditionally proven to be hard task, and this year looks set to be just as hard, especially as the spirits industry has always been viewed as something of a cash cow by Westminster. The problem is that consumers have become used to the price differential, and are, it seems, prepared to carry on spending large amounts of money on Scotch and other spirits each year, even though the duty on whisky is around 10 pence higher per pub measure than either beer or wine.

Convincing the government to swap this certain revenue stream for one which, the SWA argues, will be even higher when duty rates are cut will continue to be difficult, especially in the current economic climate. Drinkers may be hoping for some good news next month, but history suggests that they will have little to drink to come Budget day.

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