£1 whisky tax could boost Scottish economy by £1 billion

Scotland's benefits from its whisky industry are 'disappointing', says Prof John Kay
Scotland's benefits from its whisky industry are 'disappointing', says Prof John Kay
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A FORMER adviser to First Minister Alex Salmond has suggested that a £1 tax on Scotland’s national drink could provide a boost to the country’s economy of up to £1 billion.

Professor John Kay, who served on the First Minister’s council of economic advisors believes that levying a tax on whisky sold within Scotland would enable the industry’s financial gains to be shared with its country of produce.

Benefits from exports to emerging markets such as those in Africa and South America were ‘disappointing’, said Mr Kay.

The industry is estimated to be worth around £5 billion once the product leaves Scotland’s distilleries, with £500 million being spent on industry wages and funds for supplies totalling around £1.5 billion, leaving a profit of around £3 billion. The industry employs around 11,000 people in Scotland.

Mr Kay doesn’t believe a tax would lead to lower demand if distillers took in the extra cost rather than drinkers.

Scotland already has power of charging for water, and it is not thought that additional constitutional changes would be needed.

Mr Kay told the programme, Scotched Earth: “I think the benefits to Scotland from the whisky industry are really quite disappointing.

“The largest producers are not based in Scotland. Their profits go mostly to people who are not resident in Scotland.

“They don’t pay much tax in Scotland and we don’t think they pay much tax in the UK.”

Former RBS chairman Sir George Mathewson said that a 50p tax on every bottle could lead to higher prices, but would not form a ‘major percentage of the sales price.’

“I don’t believe it [the industry] would be substantially harmed and I believe the success could be spread around a little more,” he added.

Peter Lederer, Scotland’s Director of leading whisky firm Diageo, felt a new tax would give off the wrong message to potential investors.

“If the argument in an economy is to take a successful business and keep taxing it because it’s successful, that gives the wrong impression.”

Chief executive of the Scotch Whisky Association Gavin Hewitt also voiced his concern, warning that Scottish whisky is competing in challenging international markets where it is up against other spirits and whiskies.

He said: “I cannot see why any government would apply a production tax which would make Scotch whisky less competitive overseas against other drinks which are cheaper to produce and cheaper to sell.”

• Scotched Earth will be broadcast on BBC1 Scotland tonight at 10.35pm