Whisky tax 'could benefit Scots'

 
Mr Kay said the production of each bottle of whisky could be taxed Mr Kay said the production of each bottle of whisky could be taxed

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A tax should be levied on each bottle of Scotch whisky to give its country of origin a greater share in its growing success, economic experts have said.

It is reckoned a tax of £1 on the production of each bottle could boost Holyrood coffers by at least £1bn.

The call came from Professor John Kay, who served on the Scottish government's Council of Economic Advisers.

The Scotch Whisky Association said the move would hit demand, reduce investment and cost Scottish jobs.

Prof Kay said the recent exporting success of Scotch had brought "disappointing" benefits to Scotland.

In a BBC Scotland investigation, Sir George Mathewson, who was chairman of the Council of Economic Advisers appointed by First Minister Alex Salmond, supported the idea.

tax graphic

The Scottish government cannot now tax the alcohol, as that power is reserved to Westminster.

However the former chairman of the Royal Bank of Scotland said Holyrood could put a levy on the water used in the distilling process.

Powers over charging for water are already devolved to Scotland so it was argued they would not require additional constitutional changes.

The Scotch whisky industry said it exported 40 bottles per second in 2011. When the produce left the distilleries, it was reckoned to be worth about £5bn.

In addition to the huge market in the United States and France, Scotch has had great success in attracting the fast-growing middle class in emerging markets from South America to Asia and Africa.

Scotland's whisky industry generates billions each year

However, Mr Kay, who is an economics professor and author, criticised the industry for the concentration of ownership in major corporations outside Scotland, meaning most of the profits leave the country.

Diageo, which has its headquarters in London and is also listed on the New York stock exchange, is the leading player.

It is expanding towards a 40% share of the Scotch market.

Whisky is about a third of its business, with total profits last year of £3bn.

Prof Kay said: "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."

Prof John Kay said the benefits to Scotland had been 'disappointing' Prof John Kay said the benefits to Scotland had been 'disappointing'

According to analysis by Biggar Economics consultancy, in work commissioned for BBC Scotland, the Scotch whisky industry spends about £500m on paying fewer than 11,000 direct employees.

Supplies are reckoned to cost the industry around £1.5bn, of which 80% goes to Scottish firms, including grain farmers, packaging and haulage.

That leaves £3bn in profits and the cost of capital.

On that basis, it is calculated that a 10p per bottle tax on the production of Scotch whisky could raise £104m, rising to £1.04bn for £1 per bottle.

That assumes distillers absorb the extra tax from profits, which would lead to a drop in corporation tax paid to the Treasury in London.

If, however, the tax is passed on to customers in higher prices, it is assumed there would be a drop in demand but it would lead to a much smaller drop in corporation tax paid by distillers.

In that case, Biggar Economics said there would be a £128m net gain from a 10p tax and £1.22bn gain from a £1 per bottle tax.

Sir George said a new tax of 50p per bottle could lead to higher prices but that "would not be a major percentage of the sales price".

Sir George Mathewson said he did not think the industry would be damaged Sir George Mathewson said he did not think the industry would be damaged

He said: "It's also highly profitable as I understand it, so it would seem to me there's room there for something."

He argued that employment from whisky was "pretty minimal for that scale of business".

And he said that a bottle tax would be mainly paid from overseas rather than the UK.

"I don't believe it (the industry) would be substantially harmed and I believe that the success could be spread around a little more," Sir George said.

Gavin Hewitt, chief executive of the Scotch Whisky Association, which represents the industry, stressed that Scottish-made whisky was competing in tough international markets where it was up against other whiskies and other spirits, from vodka to distilled rice.

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."

He went on to stress the industry's commitment to Scotland, saying: "We have already enjoyed over £1bn of investment into Scotland in the past four years.

"I will put my head on the block now and say that we're going to enjoy £2bn of investment in the Scotch whisky industry in the next three to four years."

Peter Lederer, director of Diageo in Scotland and a senior figure in the tourism sector, said that a new tax would send the wrong signals to those thinking of investing in the Scottish economy.

He said: "If the argument in an economy is to take a successful business and keep taxing it because it's successful, then I think that gives the wrong impression."

Scotched Earth will be shown on BBC1 Scotland at 22:35 on Wednesday 9 January. It is also scheduled for broadcast several times on the BBC News Channel during Saturday 12 and Sunday 13 January.

 

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  • rate this
    -2

    Comment number 505.

    Good idea.

  • rate this
    -2

    Comment number 504.

    Only one pound why not ten i have simple reason for this I DONT DRINK THE STUFF

  • rate this
    0

    Comment number 503.

    This is not a SNP proposal.

    This is an idea someone has come up with & the BBC editor Douglas Fraser has used it in a programme about Scottish whisky. There is no comment from Alex Salmond or the Scot Gov

    Read both articles - google it, check the Scot Gov website

    It's easy for the BBC to slip AS name in & the public do the rest!

    Its propaganda- that's why it's open to comment!

    It won't happen

  • rate this
    0

    Comment number 502.

    Gonna miss the Barnett formula, huh?

  • rate this
    -1

    Comment number 501.

    Keith , no ,not talking red label rubbish ,thats what competes with yanks & irish .People WILL pay for our Malt Whisky esp. foreigners ,so a £ a bottle JUST for Scotland will be good. Kelly you are wrong too...plenty money in UK look at £3Bn spent on a few days sales ! You need a drink after spending £1000 on handbag!
    If Salmond has any bottle he'll put that £ per bottle on just for Scotland

  • rate this
    0

    Comment number 500.

    And they think they have a drink problem....

  • rate this
    0

    Comment number 499.

    ..@28. Ratty.."Good idea... and whilst we are at it can we start locally taxing English Tea, Welsh Rarebit and all the other products with national names in them?"
    ...
    There was me thinking tea was from India, China, Sri Lanka etc! As a name, 'Rarebit' is an affectation, as a back-formation from rabbit (i.e. cheese-on-toast being a poor Welshman's rabbit supper)

  • rate this
    0

    Comment number 498.

    I expect the Scots really want all the excise duty the UK government currently collects from scotch whiskey.
    If the try adding an extra cost to scotch, including exports, all that will happen is their sales will drop.
    It would be a good thing for the Irish, Welsh and USA whiskey makers though.

  • rate this
    0

    Comment number 497.

    Some people dont understand 2 major things in future life of Scotland
    1.If independance comes (I think not) then taxes WILL have to rise to cover hiddden costs that will inevitably lead to tax increase or lose free bus passes and prescriptions etc so do it hru DRINK ! 2.The phenomenal increase in upper class China mean huge exports there as long as we make it Law that Scotch comes form here !

  • rate this
    +2

    Comment number 496.

    If governments lived well within their means, they would not have to keep adding tax to tax on top of tax and duty.

    Governments believe there is an endless supply of cash, because if the current generation can not afford it, the next generation of people (and the next) will be able to eventually pay off any debts they incur.

    Like the Golden Goose, more tax will kill the demand of Golden Liquids.

  • rate this
    +2

    Comment number 495.

    486.Knut Largerson
    So the Picts are alive and well, and no doubt living in flats in central Glasgow. Mystery resolved, although not quite as exciting as I had imagined.

  • rate this
    +2

    Comment number 494.

    491.OLDCOMP
    The rest of the UK give the Scots too much money now through the Barnett Formula which has never been updated.

    Rubbish - the Barnett formula was not designed to be applied for this purpose - even Barnett himself admitted this. It takes no account of north sea oil revenue ! You've been believing what you read in the Daily Mail / Sun - articles written by sloppy journalists...

  • rate this
    0

    Comment number 493.

    490. squeezy

    Who cares? living in rural France I put away a couple of barrels of plums each year then in the summer a local distiller turns it in to 'eau de vie' and it is used in cooking, on ice cream, and for a late night drink after a meal. It is around 40% like whiskey but it costs me, with tax, 4€ per litre!
    What a wonderful life.
    --
    Yeah but, you have lost your virgin superstore.

  • rate this
    0

    Comment number 492.

    Tax is ridiculously over complicated as it is. Adding another tax just for whisky is just unnecessary bureaucracy.

  • rate this
    -5

    Comment number 491.

    The rest of the UK give the Scots too much money now through the Barnett Formula which has never been updated. If the Scots wants independence let the Whole of the UK vote on the matter and then build a wall between England and Scotland.

  • rate this
    0

    Comment number 490.

    Who cares? living in rural France I put away a couple of barrels of plums each year then in the summer a local distiller turns it in to 'eau de vie' and it is used in cooking, on ice cream, and for a late night drink after a meal. It is around 40% like whiskey but it costs me, with tax, 4€ per litre!
    What a wonderful life.

  • rate this
    0

    Comment number 489.

    477. Gammarus
    1 HOUR AGO
    Nearly pub time: time for good honest real ale, locally brewed by skilled artisans using locally produced malt and , er.... American hops.
    Beats whisky anyday.
    --
    According to the beeb artisans make coffee.

  • rate this
    0

    Comment number 488.

    This goes against the ideals of the nationalists of people in Scotland not paying any tax and the whole of Scotland living off oil revenue.

  • rate this
    0

    Comment number 487.

    Perhaps Scotland could invest in haggis farms, and haggis hunting lodges, I hear that farmed haggis is not a good as the wild stuff, and that they are really difficult to catch, but are fantastic to eat. Also as you know construction also helps the economy, may be they could use the German firm Hansel and Gretel inc, they make fantastic ginger bread houses, but use scots renewable short bread,

  • rate this
    0

    Comment number 486.

    449. LUFCAT
    What ever happened to the Picts?
    Picts were probably small independent tribes till the Romans arrived encouraged loose confederations.
    After the Romans they lost influence to the Gaels (Scots/Irish/Manx), & waves of Invaders (Vikings etc). Eventually they merged with the Gaels to become today's people.
    So essentially they (The Picts) are still there.

 

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