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
    -3

    Comment number 65.

    There's an endless supply of misery and resentment in Scotland - how about bottling that and selling it throughout the world?

  • rate this
    -1

    Comment number 64.

    Taxing the water!!!

    Sounds like Salmond is getting desperate.

    What's next, a tax on Highland air!?

  • rate this
    +3

    Comment number 63.

    27. Peter Sym

    I realise this - it's not like anywhere outside the UK pays duty to HMRC either. But in so few words it's difficult to explain. Imagine how "booze cruise" revenues in Scotland would rocket up if they lowered duty and made the English market uncompetitive.

  • rate this
    +3

    Comment number 62.

    ..@4. talbotsun.."They're not going to do the same with scotch eggs, are they?"
    ...
    Combine the two and you have pickled eggs! (Well, daft HYS topics require daft responses!)

  • rate this
    +3

    Comment number 61.

    Start selling it in cans.

  • rate this
    +5

    Comment number 60.

    I agree that a quid on an expensive single malt won't hurt the market BUT the majority of Whiskey made in Scoltand is cheap blends such as Bells and the extra quid is going to kill them. If your buying cheap whyskey do you really care if it's Scotish, Irish or American? Your probably cutting it with a load of Cola anyway...

  • rate this
    0

    Comment number 59.

    A Government only sees the the possible Cash and Tax, it doesn't have to worry about meeting Sales Targets, Maintaining a Competitive Price, etc...and it shows more in Bonny Scotland more than others. It's supposed to be Tax, NOT TORTURE, you don't keep turning the screw 'till they scream!...FOOLS.

  • rate this
    +13

    Comment number 58.

    I echo Remus although I haven't tried the Norfolk produce yet. I hope Wales doesn't follow suit. My main tipple is Single Malt WELSH (Penderyn) which, in all its guises and palate, is distinctly flavoured, wonderful stuff. The Scottish administration may well damage one of their 'big earners' which is, if I remember correctly, exactly what the original Scottish complaint was against Westminster !

  • rate this
    +6

    Comment number 57.

    Alex Salmond is looking at every way possible to finance the lavish welfare state of an independent Scotland, once the handouts from Westminster cease. This could extend to charging England for Scottish water, hydro-electricity, fishing and oil brought ashore north of the border. With a population of about 10% of the UK, many of whom are on benefits, he will need every (Scottish) penny.

  • rate this
    +2

    Comment number 56.

    Excuse some of the ignorance here if you can. It is Scottish Whisky - Irish and American Whiskey get your facts right please. And I cannot understand what politics has to do with the sale of Scottish Whisky !

  • rate this
    +3

    Comment number 55.

    The angels already take their share. We don't want the devil to have a share, too.

  • rate this
    -1

    Comment number 54.

    Typical left wing academic nutty thinking. Appointed by a socialist thinking government who need every penny they can get to spend, spend, spend. The benefits to Scotland are jobs and handsome taxes via rates which are much higher north of the border due to a different and unfair method of calculation to that used in England.

  • rate this
    0

    Comment number 53.

    @45

    Don't be fooled by the politicians sir: the majority of the English I speak with would be happy to see Scotland leave the union.

    I have no wish to continue being associated with the unhealthiest and most belligerent country in Europe. Don't let the door hit your backside on the way out of the Union and into the poor-house though...

  • rate this
    0

    Comment number 52.

    In reply to #36
    When £1.00 per bottle is applied to the export price of a case of blended Scotch or Single Malt this could amount to 10-80% of the value of a case. I assure you this would make the product uncompetitive especially at the lower end of the market where the volume and jobs are resulting in closure of bottling plants across Scotland

  • rate this
    -5

    Comment number 51.

    Whiskey successful? Tax it. Too much? Tax it. Too little? tax it. Enjoy whiskey? tax it. And if there's no problem? tax it. Tax has created a billowing bloat of public services here in the UK that impedes, blocks and sucks the will to live, as inert public servants laugh all the way to their fat retirement cottages. Go on Scotland, defect, and take our lefty thinking with you.

  • rate this
    +5

    Comment number 50.

    #37 Shoogly Peg. The proposal is a bottle tax so it won't just apply to bottles consumed in Scotland. The argument is that they tax each bottle & the producer can either absorb that (and pay less corp tax), or pass the tax onto the consumer. The tax is flat so cheap bottles attract relatively more tax than expensive bottles. The UK Government would get less tax but Scots Government would get more

  • rate this
    +5

    Comment number 49.

    Another example of superficially "clever" people being stupid. As someone else has pointed out Scotch whisky has to be made in Scotland. Instead of as now charging a high excise duty based on domestic consumption, why not charge a small excise duty on all whisky sold in the domestic market and exported? Scotland would benefit all round and it would have minimal effect on global pricing.

  • rate this
    -1

    Comment number 48.

    While they're at it, why not tax IRN BRU, tunnocks caramel bars, shortbread & scottish Salmon. All the money can then be spent on social housing projects and benefits for some low lifes in Glasgow.

  • rate this
    0

    Comment number 47.

    20. Remus
    For those who object to paying tax on Scotch whisky there is an alternative. English whisky, produced in Norfolk and, in taste and quality, on a par with most whiskies from north of the border. The Welsh also make fine whisky.
    ------
    Even better still, it comes without the Scottish attitude !

  • rate this
    0

    Comment number 46.

    Whisky Tax could benefits Scots.

    Really? Tell us why whisky tax isn't benefiting Scots just now please? Oh, that's right, profits parked off shore and little to no tax paid and fully endorsed and supported by the UK government. Seems to be tsarting to unravel for The Establishment and the Bitter Together brigade.

 

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