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Tax on Scotch ‘unsustainable’ says whisky chief

Karen Betts

Karen Betts: ‘tax on Scotch cannot reasonably rise any further’ (pic: Terry Murden)


 

Today is “Duty Paid Day”, marking the first day that consumers of Scotch Whisky have theoretically paid off excise duty and VAT on Scotch sold in the UK in 2018.

With nearly three quarters (74%) of the cost of an average priced bottle of Scotch being collected in duty and VAT, Scotland’s national drink is already one of the highest taxed consumer goods in the UK – more than any other alcoholic product.

As the industry prepares for this year’s Autumn Budget, distillers fear the Chancellor is set to hike taxes again, further reducing Scotch’s domestic competitiveness and the capital available for investment, and risking the future success of Scotch.

Scotch whisky supports about 10,000 jobs directly and 40,000 jobs in the supply chain, while generating exports to 180 markets worth more than £4bn. 

Scotch Whisky Association chief executive Karen Betts said:  “Under the current excise and VAT rates, £3 in every £4 spent on Scotch Whisky in the UK goes directly to the Treasury in tax. To look at this figure differently, it has taken 270 days to pay off the 74% tax burden on the average priced bottle of Scotch Whisky in the UK.

“Tax on Scotch is unsustainable, has hit a ceiling and cannot reasonably rise any further. An increase in the tax burden would inhibit investment and undermine future growth.

“As we approach the Autumn Budget, we are urging the Chancellor to signal his support for Scotland’s national drink by continuing the freeze on duty he announced just last year.

“This would be a strong signal of support for an industry which wants to continue to have the flexibility to invest in the future as a dynamic job-creator, a great employer, and a stand-out exporter”.

Brexit food and drink hike warning

A new report shows retailers could face an additional £9.3bn annual tariff bill for food and drink products imported from the EU if a settlement on Brexit isn’t reached.

The new Barclays report, Scale, Disruption and Brexit – a new dawn for UK food supply chains? shows that in a no-deal Brexit, food retailers would be affected by a new average tariff of 27% on food and drink goods entering from the EU, significantly more than the 3-4% levy that would hit non-food products.

Additionally, every consignment of goods from the EU will require a customs declaration which starts at a minimum of £50.

Last year, the UK imported £48bn worth of food and drink, approximately 40% of the total UK market.  Of these, 71% originating from within the EU entered the UK free of customs duties and other trade costs. While a free trade deal or the Chequers option, would help the food industry avoid tariffs and related duties, a no-deal Brexit could mean significantly higher costs for retailers and consumers.

Euan Murray, relationship director, Barclays Corporate Banking, Scotland, said: “Some products would avoid tariffs, even in a no-deal scenario, but for most goods the effect of an increased tariff burden would be extremely damaging, and cheaper goods would be the hardest hit. 

“71% of our imported food and drink comes from the EU, and 60% of our exports go to the EU. A positive agreement on trade is essential if we are to protect UK exporters and avoid significant price rises for UK consumers.”

Hardest hit will be those products that attract both a category tariff as well as a specific duty tariff, such as frozen beef with a specific duty of 298%. Common cooking products also face steep duties including beef cuts at 101%, cream at 81% and garlic at 71%.

Further costs could also mount under a hard Brexit.  In addition to customs declarations, comes the burden of complying with stringent EU Sanitary and Phytosanitary (SPS) regulations, which could be the equivalent of paying an extra 8% in duty tax on EU food and drink imports.

                                                           

 



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