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UK duty hike loses Treasury £98m

The Scotch Whisky Association (SWA) has revealed that the UK government lost out on nearly £100 million (US$127.7m) in tax revenue since the chancellor increased alcohol duty last year.

Scotch Whisky
Alcohol duty in the UK increased by 10.1% last August

The chancellor, Jeremy Hunt, increased duty on spirits by 10.1% from 1 August 2023, the biggest rise in 40 years. In his autumn budget, announced in November last year, Hunt froze spirits duty until August 2024.

Analysis of His Majesty’s Revenue & Customs (HMRC) tax receipts by the SWA found that tax revenue from spirits fell to £1.87 billion (US$2.39bn) between August and the end of December. The figure represents a year-on-year drop of 5%, costing the Treasury £98m (US$125m) in revenue.

UK inflation rose unexpectedly in December 2023 for the first time in 10 months, which is believed to be fuelled by the tax hike.

According to the SWA, the UK pays the highest level of duty on spirits in the G7 and the fourth-highest in Europe. Consumers in France pay half the tax on spirits than those in Scotland. The UK tax on an average-priced bottle of Scotch whisky is 75%.

The SWA is now urging the government to cut alcohol duty in the next budget, which will be announced in March.

Graeme Littlejohn, director of strategy and communications at the SWA, said: “Until last August, the Treasury had repeatedly frozen duty on spirits and seen more tax revenue as a result.

“Since increasing duty by 10.1%, tax revenue has fallen sharply. There is an inescapable conclusion – the tax rise hasn’t worked and the chancellor should cut alcohol duty in the budget on 6 March.

“Doing so will support the public finances and businesses, including pubs and restaurants. The chancellor should also remember that Scotch whisky and spirits represent a third of hospitality alcohol sales – so, if he wants to back pubs, then he needs to cut all alcohol duty, not just products coming out of a tap under his ‘Brexit pubs guarantee’.”

The SWA recently published a report that revealed Scotch added £7.1bn (US$9bn) to the UK economy in 2022.

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