TAX AT­TACK

Ris­ing tax bur­den of whisky has Blair Bow­man con­cerned

Scottish Field - - CONTENTS -

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

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