Scotch Whisky welcomes tax freeze, but urges reform

The Scotch Whisky Association (SWA) said on Wednesday the UK Chancellor has offered some “breathing room” to distillers facing continued US tariffs by freezing spirits duty in the budget.

However, UK duty on Scotch Whisky remains 77% higher than the average across the EU.

The SWA said the UK Chancellor must now set out a clear timetable for the reform of the UK’s “outdated system” of alcohol taxation.

In a statement, the SWA said: “The Chancellor announced a duty freeze across all four alcohol categories.

“The duty rate on spirits remains £28.74 per litre of pure alcohol, meaning that of the £15.01 average price of a bottle of Scotch Whisky, £10.55 is collected in taxation through duty and VAT.

“The tax burden on the averaged priced bottle of Scotch Whisky remains 70%.

“The SWA had called on the UK government to cut spirits duty to support the industry as it continues to suffer from a 25% tariff on exports of Single Malt Scotch Whisky to the United States.

“The tariffs, imposed due to a trade dispute over UK, EU and US subsidies to Airbus and Boeing, have already cost the industry over £500m in lost exports to the US.

“Last month the SWA announced that global exports of Scotch Whisky had fallen by 23% in 2020, a fall of over £1.1bn.  As a result, investment is at risk and jobs are being lost.

“Scotch Whisky continues to be taxed at a higher rate per unit of alcohol than wine, beer and cider and faces the highest duty rate among G7 nations, putting the industry at a competitive disadvantage.

“The industry is calling on the Chancellor to put in place a clear timetable for the review of UK alcohol duty and implementation of a new, modern system of alcohol taxation.”

SWA CEO Karen Betts said: “The freeze on duty announced by the Chancellor is good news for hospitality and gives distillers some breathing space in the face of some of the worst trading conditions anyone can remember – caused by a combination of US tariffs, the coronavirus pandemic and the end of the Brexit transition period.

“What’s really important to us is that the government redoubles its efforts to resolve the 25% tariff imposed by the US on Single Malt Scotch Whisky.

“This stems from an unresolved trade dispute between the EU, UK and US governments over subsidies to aerospace in breach of WTO rules.

“It is causing real damage to our US exports, which have fallen by over half a billion pounds since the tariff came into effect.

“And it risks impacting permanently Scotch Whisky’s market share in the US, which has long been one of our most successful markets.

“The Chancellor must also set out a clear timetable for the reform of the UK’s outdated system of alcohol taxation.

“Now the UK has left the EU, we can modernise and reform the duty system to ensure that it is clear and fair both to businesses and consumers.”