The Scotch Whisky Association has called for a cut in duty on the strong stuff after warning that sales fell by 1m bottles over the first six months of the year..
The association said the slump could be attributed to a near 4% increase in duty on spirits, one of several tax-raising measures imposed by the chancellor, Philip Hammond, in his March budget.
Industry figures show that an average bottle sold at £12.77 will generate more than £10 for the Treasury, meaning that tax makes up around 80% of the retail price of a bottle of whisky. Official HMRC figures show 36.7m bottles were released for sale in the first six months of 2017 – down from 37.7m in the same period last year.
However, the industry trade body said the tax hike didn’t appear to be working, as it cited a decline in tax revenues from spirits of more than 7% to £697m from £751m in the first three months of the financial year.
Karen Betts, chief executive of the association, said the quarterly HMRC figures showed that the Treasury had made an error.
“Philip Hammond’s damaging 3.9% spirits duty hike has hit UK demand for Scotch and seen less money going to the Treasury,” she said. “The chancellor should use his November budget to drop the dram duty and boost a great British success story.”
She said the whisky industry supported 40,000 jobs and played a key role in Scotland’s economy, accounting for more than £4bn in exports. Scotch is Britain’s biggest food-and-drink export by far, with chocolate sales of £660m a distant second.
However, the damage caused to domestic sales by the increase in spirit tax is a double whammy for an industry that has suffered several years of falling export sales. Intense competition from distillers in east Asia and the US has eaten into export markets and reduced sales abroad. The industry is also battling proposals in Holyrood to implement a 50p minimum price for alcohol in Scotland.
Betts said the Treasury should look at the example set by a cut in duty two years ago. She said a 2% reduction in duty in 2015 saw spirits revenue rise by 4%, giving a £124m boost to the Treasury. And a freeze in 2016 led to a revenue increase of more than 7%, pouring an additional £229m into the chancellor’s coffers.
