Research shows how tax hits whisky production

MSP calls for freeze as study shows slumps follow hikes to levy

New research has shown that whisky production levels fall when taxes are hiked by the government.

The Scottish Parliament Information Centre (Spice) study also shows that production increases when a tax cut is introduced.

The report highlighted the correlation between a 9% increase in duty in 2008-09 and a subsequent 10% fall in production.

And it shows how further slumps followed hikes in the levy in each year between 2010-11 and 2013-14.

Since the turn of the century, spirit excise duty has only been cut once – in 2015-16 - and it resulted in an increase in production, which continued the following year when the tax was frozen.

The Scotch Whisky Association has also highlighted how the 2% cut to spirits duty in March 2015 led to tax revenues increasing that year by £123 million, to £3.15bn.

But fears have been raised that Mr Hammond could raise spirits duty again at the next UK Budget, to be published in November 22.

Moray SNP MSP Richard Lochhead warned last night: “With damning new evidence that the UK Treasury’s excise duty hikes are causing whisky production to plummet, and likewise production soars with tax cuts – it’s obvious Philip Hammond needs to freeze the Tories’ tax on this global success story in the upcoming budget.

“Providing certainty that the Scotch whisky industry won’t face further tax hikes from Westminster is the least the Tories can do as their ‘blind Brexit’ threatens unnecessary and damaging tariffs on one of the country’s most lucrative exports.”

The Spice research also showed that the number of distilleries in Scotland, including whisky and other spirits, increased from 145 to 220 between 2010 and 2017, with 30 new businesses opening their doors in the last two years alone.

The top producers were Moray, which was home to 23% of the businesses, followed by 11% in Highland, 7% in Edinburgh and 7% in Argyll and Bute.

The Aberdeenshire area accounted for 5% of the total, while 2% were based in Aberdeen.

A Treasury spokesman said: “We recognise the importance of the Scotch whisky industry to the UK, which along with consumers, local pubs and breweries has benefitted significantly from freezes and cuts to alcohol duties.

“However, these freezes have come at significant cost to the public purse. Successive cuts and freezes to alcohol duty have cost approximately £4bn since 2013-14, which is equivalent to the yearly salaries of around 100,000 teachers’,” added the spokesman.

‘WARNED’: Chancellor Philip Hammond could be looking to the Scotch whisky industry to raise taxes in his Budget on November 22

Research shows production declines follow tax rises

The whisky industry generated £3.15bn in tax in 2015