Spirit stamp taxing too expensive?
before the government implements tax stamps on spirits. While the
introduction could be the most effective way of reducing spirit
fraud - the industry begrudges the high costs that such a move
could bring about, writes Danny Vincent.
Spirit diversion fraud in the UK remains by far the most common form of alcohol tax evasion. The UK government plans to implement a system of tax stamps to reduce the problem, but the proposal has come up against stiff opposition from the beverage industry itself.
Tax stamps would be able to identify if a consumer had paid tax on a particular item or if they had tried to avoid paying duties, and the government plans to implement the system by 2006. However, a report from the NAO - a group responsible for ensuring government efficiency - has reiterated the arguments that some in the industry hold.
The NAO claims that alcohol related fraud is much lower than that related to tobacco - thus implying that the government may have placed an unjust importance on implementing a system of tax stamps.Customs does estimate that £650m is lost each year, however, but it is indeed the cost factor which is putting the industry off the idea.
"The industry has considerable concerns over the uncertain benefit of tax stamps in preventing an uncertain amount of fraud," said Edwin Atkinson, from the UK's Gin and Vodka Association. He added, "the only thing that is certain is the high cost to the legitimate provider."
The report does make an important contribution to the current debate on the Chancellors proposal to introduce strip stamps, but it is unclear how the problem will be fully solved.
The government predicts that in the first year of implementation of a tax stamp system £160 million could be saved. The industry is looking for an alternative to tax stamping and the government said that it will also look into other options of reducing fraud.
"It is proposed to give the trade a further opportunity to suggest a workable alternative, it must deliver a reduction in spirits fraud comparable to that which would be delivered by tax stamps, and to the same time scale," it stated in it's 2003 Business Briefing.
"The strategy will provide customs with a better framework to tackle the alcohol fraud, but will require effective communication across the department to implement it successfully."
"The development of a longer term strategy to manage the risks of alcohol fraud is also to be welcomed, although customs will need to ensure effective cross-departmental communication if it is to be successfully implemented," said Sir Jon Bourn, the head of the NAO.
For more information on either side of the argument visit the government's briefing or the NAO's report.
