The problem is that Scotch whisky is already very highly taxed, with £3 in every £4 spent on Scotch collected by the Treasury. Here Scotch whisky, along with gin and other spirits, is caught in an excise duty system that has not been fit for purpose for decades.
Our system of alcohol taxation is complex, having evolved over some 200 years, and was made more so by EU rules on the harmonisation of excise duties. The upshot is a mess, with different tax rates applying to different alcoholic drinks in different ways. The situation is particularly stark for Scotch whisky, where a measure ends up being taxed 256 per cent more than half a pint of cider.
This isn’t fair to Scotch whisky, other UK spirits producers, or consumers. Why should you pay more tax to drink the same amount of alcohol in spirits than in other drinks?
It’s confusing too, implicitly encouraging consumers not to drink spirits but other drinks instead. It’s also complex for HM Revenue & Customs to administer. And it directly discriminates against an important domestic industry. It happens that over 92 per cent of UK spirits are produced or bottled in Scotland, so this discrimination weighs heavier north of the border.
Chancellor Rishi Sunak has acknowledged the high tax burden on spirits and committed to a review of how alcohol is taxed. This commitment “to ensure our tax system is supporting Scottish whisky and gin producers and protecting 42,000 jobs supported by Scotch across the UK” is a promise the industry needs the government to deliver on.
It’s hard for distillers to understand why the UK tax system continues to treat imported wine more favourably than our own spirits. Distilleries are part of our heritage.
They are cornerstones of communities across Scotland. They provide tens of thousands of good jobs. They are innovating to tackle climate change. They are attracting more and more tourists. They are driving exports and an affection among people worldwide for Scottish food and drink. So why treat Scotch whisky differently to other drinks?
The current situation is manifestly unfair and unsustainable, hampering investment and growth. Which is why the Scotch whisky industry has campaigned for some years for the wholesale reform of the duty system.
Ultimately, the tax people pay on the whisky, gin, wine, beer or cider that they choose to drink should more accurately reflect the alcohol content of those products. The system should be rational and considered, not arbitrary.
If, as we understand he might, the Chancellor announces the next stage of the alcohol duty review, we hope he will grasp unequivocally the opportunity to deliver the fairer, clearer, simpler and more modern system that we all deserve.
It will be a significant boost to our industry, as well as to other spirits distillers across England, Wales and Northern Ireland, and consumer polling supports it too. Moreover, it’ll deliver on a Conservative manifesto commitment.
So will you back reform, Mr Sunak?
Karen Betts is the chief executive of the Scotch Whisky Association