Rising tax burden of whisky has Blair Bowman concerned
Most whisky consumers in the UK are shocked when they learn how unfairly whisky is taxed in terms of spirits duty. The tax burden for an average bottle of blended whisky currently stands at 74% of the total price. According to the Scotch Whisky Association (SWA) £3 in every £4 spent on Scotch whisky goes to HM Treasury in excise duty and VAT.
Whisky and other spirits are taxed at a much higher rate per unit than other alcoholic drinks - whisky is taxed 327% more per unit than cider and 19% more than wine.
On an average £14.15 bottle of blended Scotch whisky the tax burden is £10.41, which leaves just £3.74 for the cost of the whisky and profit to be shared by the brand owner, distributors and retailers. The cost of duty has major implications for the margins on whisky sold domestically in the UK.
You may have noticed that whisky is often significantly cheaper to buy when abroad. This seems ridiculously counter intuitive when you factor in shipping costs and distribution. Surely it should be cheaper to buy in the place where it is made.
We are seriously unfairly taxed when it comes to alcohol in the UK. The Wine and Spirits Trade Association (WSTA) says that the UK’s ginormous rates of duty on alcohol mean that it pays more in alcohol duty than Germany, France, Poland, Italy and Spain combined. Indeed, British drinkers pay 38% of all alcohol duty claimed in the EU.
Despite the fact that Scotch whisky is a genuine success story for the UK and represents a whopping 20% of all UK food and drink exports it has been consistently penalised by HM Treasury.
At a speech in Glasgow in March 2017 the Prime Minister said that Scotch whisky is a ‘truly great Scottish and British industry’. Then, just five days later, the Chancellor announced a 3.9% excise duty increase during the Spring Budget. During the Autumn Budget in November the Chancellor subsequently decided to freeze duty, although a cut in duty would have been significantly better for the industry.
HM Treasury predicted that the freeze in duty would grow spirits revenue by £2m, but a study from the SWA using real-world data from HMRC shows that HM Treasury’s receipts from spirits duty freeze have increased by £91m, a year-on-year increase of 7.3%. A cut in spirits duty would no doubt make an even more significant increase to the Chancellor’s purse.
Whisky also faces unfair taxes abroad. In many countries whisky faces higher taxes than the local spirits, in flagrant violation of
European Union and World Trade Organisation rules. For example in Serbia, Scotch whisky has two and a half times more excise tax than the local spirit rakija. Similar cases have also been highlighted by the SWA in Greece and Hungary, where they are taking action against the discrimination faced by whisky.
For connoisseurs of single cask or cask strength whisky the duty paid is even higher because spirits’ excise duty is based on pure litres of alcohol, which is currently set at £28.74 per litre of pure alcohol. So in a standard 70cl bottle of whisky bottled at the minimum alcoholic strength for whisky of 40% you would pay duty of £8.05 (not including VAT). However, for each 0.5% increase in alcoholic strength the duty goes up by ten pence. So for example you’d pay an additional £3 excise duty on a cask strength whisky at 55% abv. Don’t forget this is before VAT has been added, so the tax burden can add up quickly.
In the first half of 2017 there were one million fewer bottles of whisky sold in the UK than in the same period in 2016, a drop that was attributed to the duty spike of 3.9% in the aforementioned Spring Budget of 2017.
The Scotch Whisky Association was once again lobbying the government ahead of the Autumn Budget with their #ScotchSuperTax campaign to raise awareness of the unfair levels of duty imposed on whisky. This campaign continues: you can help by writing to your MSP or MP and asking them to back a cut in spirits duty, or simply tweet using the hashtag #ScotchSuperTax and tell your whisky-loving friends.
If we can all persuade our elected representatives to back the SWA campaign then consumers may get cheaper whisky, the government will receive more tax revenue and Scotland will get more jobs – a rare win-win.
“The UK pays more in alcohol duty than Germany, France, Poland, Italy and Spain combined