SWA calls for further 2% spirits tax cut

The Scotch Whisky Association (SWA) has today launched a campaign calling for a further 2% cut to spirits duty in the upcoming UK Budget, revealing that last year’s 2% cut contributed to a £96 million increase in revenue for the Treasury.

Tax – excise and VAT – on an average priced bottle of Scotch Whisky currently stands at 76% following a historic 2% cut last year – the first cut in spirits duty in almost 20 years. It was only the fourth time that tax on whisky has been cut in the last century. Currently, the consumer pays around £9.91 in tax on every average priced 70cl bottle of Blended Scotch Whisky in the UK, the highest rate of any European country.

Launching its “Fair Tax for Whisky: Stand up for Scotch” campaign this morning, the SWA said the cut has contributed to a £96m increase in revenue from spirit drinks to the Treasury between April and December 2015, compared with the same period in 2014. Revenue jumped 4% from £2,401m to £2,497m.

Now, the trade body is calling for the Chancellor to approve a further 2% cut in spirits excise the March Budget, taking the total tax to 74%.

“The Government’s own figures tell a simple story: when tax is too high, if you cut it, revenues go up not down”, said David Frost, chief executive of the SWA. “Along with the British public, we believe that the current tax of 76% on a bottle of Scotch is too high. An ordinary drinker will hand over almost £10 in tax on each bottle they buy. We would like to see a 2% cut again this year.

On a £13 bottle of whisky £7.74 is currently made up of excise duty, and a further £2.17 from VAT, leaving £3.09 over. It means that the average consumer pays £9.91 in tax on every bottle of Scotch bought. Since the UK Government scrapped the alcohol duty calculator (ADE), cut beer duty and froze duty on spirits in the 2014 Budget, and cut spirits tax by 2% in 2015, off-trade alcohol prices have slowed to under half of last year’s rises, according to research from the Wine and Spirit Trade Association.

The report showed that the average cost of beer had fallen by 1% after two successive duty cuts. Wine and spirits grew by just 2% – less than half of the annual growth rate seen in the previous two years. The Scotch whisky industry generates £5 billion in revenue each year and supports more than 40,000 jobs across the UK.

“George Osborne listened to the industry last year when we said that a cut on duty would increase confidence, safeguard jobs, help consumers, and thereby ultimately benefit the Treasury. We now have the figures to prove it. That’s why this year we are asking the Chancellor to continue what he has started. Deliver fair tax for whisky, free the industry to invest and grow, and feel the benefit through increased revenue.”

Click the next page to read Frost’s full statement on why the Scotch industry deserves a tax break…

David Frost, chief exec, Scotch Whisky Association

SWA chief executive David Frost (Photo: SWA)

“Earlier this month, the Chancellor said that the mission of this Government is “to restore our public finances to health, to make our economy more productive, to make businesses more competitive so they can create jobs”.

“The Budget in eight weeks’ time provides an opportunity to put these sentiments into action, but he will be acutely aware that his options are limited. That is why it is vital that he learns the lessons of what has worked in the past. And to find an example of a tax cut which has benefitted consumers and industry while also raising revenue for the Treasury, he has only to look back 12 months to his treatment of Scotch Whisky at the 2015 Budget.

“Last year the Scotch Whisky industry asked for a punitive, ineffective taxation policy to be thrown out. We argued that after years of exponential duty increases, the industry – a hugely important industry for the UK – should be given a break. Specifically a break in duty. We argued that this wasn’t a handout, but that it would enable the industry to invest, to secure jobs and to become more competitive.

“At the same time it would give a boost to ordinary people, who shell out almost £10 of tax every time they buy a single bottle. We now have the figures that show the sense of our argument. Since George Osborne listened and, in last year’s Budget, introduced only the fourth duty cut for Scotch Whisky in a century – revenue to the Treasury from whisky sales has actually increased.

“That’s right – since cutting duty, freeing industry from an onerous tax regime, spirits tax revenue to the Treasury has increased by £96 million compared to 2014, with Scotch Whisky representing a significant proportion of that total. When this year’s Budget comes around that figure will be more than £100 million. In one move the Chancellor safeguarded industry, eased the pressure on ordinary drinkers and boosted Treasury coffers.

“It was simple. It was effective and it should be repeated this year. There are few industries in the world that can boast both the heritage of Scotch and its long-term commitment to investment, supporting jobs in Scotland and across its extensive UK supply chain.

“Our distillers, given the chance, can be trusted to deliver a future as long and successful as our past. Last year, George Osborne recognised and championed this. But tax levels remain at 76% on every bottle. Now that we know the policy works, let’s have more of the same this year.”