Alcohol smuggling ‘significant issue’ for HMRC

Source: The Spirits Business

by Kristiane Sherry

21st March, 2016

A leading accountancy group has described alcohol smuggling in the UK as a “significant issue” as investigations into underpaid ‘sin taxes’ yield £1.63 billion (US$2.34 billion).

The revenue yielded in 2014-15 is up 6% from the £1.54 billion (US$2.21 billion) raised as a result of investigations the previous year.

In 2014-15, the HM Revenue & Customs (HMRC) department seized 189,669 litres of spirits, 5,281,646 litres of beer, and 1,489,538 litres of wine, said UHY Hacker Young, a UK accountancy network.

“Duty on cigarettes and spirits is consistently increased well above inflation – but the production cost of the goods is low – this makes them a prime target for smuggling,” said Roy Maugham, tax partner at UHY Hacker Young.

“A significant number of taxpayers are disinclined to pay the full duty on alcohol and, particularly, cigarettes – which has created a thriving black market. It’s the inevitable result of heaping a heavy tax load onto any product.

“HMRC has been attempting to tackle the problem for some time and not without successes, but smuggling is very difficult to eliminate altogether. At points HMRC’s efforts have gone too far – for example they have been criticised for seizing and destroying legal imports of alcohol and tobacco intended for personal consumption.

“At a time when HMRC is under significant political pressure to maximise the tax take, cracking down on those avoiding ‘sin taxes’ generates considerable additional revenue, and is broadly popular with the public.”

The UK government opted to freeze spirits duty in the 2016 Budget statement. The tax and VAT levied on a bottle of Scotch whisky currently stands at 76%.