Scotch producers bridle at stamp threat

Related tags Scotch whisky Whisky

UK Chancellor Gordon Brown's attempts to clamp down on tax evasion
have 'dismayed' one of the country's biggest manufacturing sectors
- the Scotch whisky industry.

In his pre-Budget speech earlier this week, Brown set out a number of measures designed to close tax loopholes and reduce tax evasion - including the possible introduction of tax stamps on spirit bottles.

But Brown stressed that he would only press ahead with a stamping plan for bottles if no better method could be proposed. "Although the government believes tax stamps constitute a necessary response to the problem of organised spirits fraud, it will also consider options for mitigating increased costs to the legitimate trade if tax stamps are implemented,"​ the Chancellor said in his statement.

Adding official duty stamps to every bottle would be a clear and simple means of ensuring that only spirits on which tax and duty have been paid reach supermarket shelves, the Chancellor argues, but while the Scotch whisky industry agrees that more needs to be done to clamp down on duty evasion, it is concerned about the significant increase in costs that the stamps would entail.

Eighteen months ago, a Treasury assessment of the impact of duty stamps on the drinks industry concluded that the move was likely to "have a severe impact on the productivity and compliance costs of the spirits industry",​ according to the Scotch Whisky Association.

"The industry has already held discussions with Customs & Excise during the last 18 months and believed in September that agreement had been reached on a way forward to tackle fraud,"​ said Gavin Hewitt, chief executive of the SWA​.

"We will be working hard to convince the Treasury that tax stamps would be a backward step damaging productivity and competitiveness and that alternative, more risk-based measures would be more effective."

But Hewitt stressed that the issue was one which needed tackling. "Let there be no doubt, fraud damages the trade of legitimate business every bit as much as the revenue, and Scotch whisky producers will do everything possible to assist the fight against fraud."

"One of our key concerns is that distillers believe the Chancellor's figures overestimate the level of alcohol fraud in the UK. We are by no means saying there is not a problem but we have challenged the figures and await a response from the Treasury."​ Brown claims that one in six bottles sold is evading duty.

Hewitt could also not resist taking a side swipe at the government over spirit duty. "While the Chancellor has said he will consider freezing spirits duty for the remainder of this Parliament, it must be remembered that high levels of excise tax only serve to encourage the sort of illegal activity we are all committed to tackling."

Hewitt declined to give any estimates of the likely cost of introducing the strip stamps, but it is likely to be millions of pounds, with bottling lines having to be refitted to allow for the stamps to be glued to each bottle as it is capped. Distillers would also have to buy the stamps in advance - effectively paying the duty on the spirit before it is even sold.

Scotch whisky is one of the biggest sources of revenue for the UK government, with some 115 million bottles sold there last year, and while spirit duty has been frozen for several years now, the SWA continues to lobby for a reduction, arguing that bringing duties into line with those in most of the rest of Europe would stimulate further growth.

But the majority of Scotch sales are made abroad - exports reached 943.4 million bottles last year - and the SWA is concerned that increased costs related to the strip stamp scheme would make the drink less competitive compared to other products and impact the continued growth of the £2.3 billion export market.

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