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Budget: tax rise ‘historic blow’ for whisky

The Scotch Whisky Association (SWA) has slammed the decision by UK chancellor Jeremy Hunt to raise duty on Scotch whisky by 10.1%.

The SWA had asked for a duty freeze for spirits in the spring budget

The increase announced in the spring budget today (15 March) is one of the largest tax hikes in recent decades, and contradicts the UK government’s 2019 pledge to “review alcohol duty to ensure our tax system is supporting Scottish whisky.”

In the budget, the chancellor confirmed duty rates of all alcoholic products produced in, or imported into the UK, would increase in line with the retail price index (RPI, inflation).

Relief will be provided for on-draught products, which make up less than half of those sold behind the bar, and will not available to 99% of distillers.

The duty rate on spirits will rise to £31.64 (US$38.18) per litre of pure alcohol, meaning that of the £15.22 (US$18.36) average price of a bottle of Scotch whisky, £11.40 (US$13.75) will be collected in taxation through duty and VAT.

This means the tax on an average priced bottle of Scotch whisky will rise from 70% to 75%.

Commenting on the budget, the chief executive of the SWA, Mark Kent, said: “This is a historic blow to the Scotch whisky industry.

“The largest tax increase for decades means that 75% of the average priced bottle of Scotch whisky will be collected in tax, reducing already tight margins for an industry which employs tens of thousands of people and invests hundreds of millions annually across the UK.

“In addition, the chancellor has chosen to further increase the competitive disadvantage faced by the industry in the UK by giving additional tax breaks, which are not available to the vast majority of distillers.

“Spirits account for more than a third of hospitality sales, but the extension of ‘draught relief’ cuts out 99% of the spirits sector, alienating both producers and consumers who choose premium quality drinks.

“We have been clear with the UK government that increasing duty would be the wrong decision at the wrong time, so it is deeply disappointing that one of Scotland’s largest and longest-standing industries has been treated in this way.

“The industry continues to grapple with significant domestic headwinds, including the soaring cost of energy, intense pressure on the hospitality sector, and increasing regulatory burdens like the Deposit Return Scheme. This tax hike just adds to the pressures on the sector and breaks the UK government’s commitment to support Scotch.

“Scotch whisky has consistently delivered for the UK economy when given stability and certainty through duty freezes, enabling the industry to reinvest in job creation and growth across the country. The chancellor has chosen to ignore the evidence and increase the pressure on hard pressed businesses, including many in the hospitality sector.

“Now that the chancellor has chosen to increase tax on Scotch whisky, we call on all MPs to reject this unjustifiable tax hike in the Finance Bill, and clearly demonstrate their support for the Scotch whisky industry.”

‘Hammer blow for Scotch’

Johnnie Walker owner Diageo said the decision would fuel inflation, further dent consumer confidence, and add to pressures in the hospitality industry.

Nuno Teles, managing director, Diageo Great Britain, added: “Today’s decision is a hammer blow for pubs, drinkers and for Scotch, a UK homegrown industry supporting tens of thousands of jobs. We urge the chancellor to reverse this punitive and inflationary tax hike.”

In addition, the government confirmed it would legislate to make changes to the duty structure for alcoholic products, creating standardised tax bands based on alcohol by volume.

The government will also introduce two new reliefs and transitional arrangements for certain wine products. These changes will take effect from 1 August 2023.

HMRC (His Majesty’s Revenue and Customs) will also take forward plans to harmonise the approval, return and payment processes for domestic producers of alcoholic products. These changes are scheduled to take effect from late 2024 with the introduction of the new digital system.

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