Home Estate Planning Scotch and spirits gave Treasury £1.4bn boost thanks to tax freeze

Scotch and spirits gave Treasury £1.4bn boost thanks to tax freeze

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The Treasury raked in an extra £1.4bn in revenue as a result of freezing excise duty on Scotch and spirits for five years – with the economic boost generated more than making up for the lack of immediate tax revenue – according to the latest data.

Excise duty on spirits was kept steady, not moving for inflation, for the five years until last year. In each year the Treasury in fact received more revenue than it had forecast if the duty rate had gone up by inflation.

For instance, the official budget watchdog the Office for Budget Responsibility forecast revenue from spirits duty – assuming it went up with inflation – at £3.8bn in 2020/21. However, increased sales at the lower, frozen rate of duty in fact contributed £4.1bn to the nation’s coffers.

However that policy was swiftly reversed in August of last year, with the Chancellor’s more than 10 per cent increase in alcohol duty costing the Chancellor £100m in duty revenue, reckon the number crunchers at the Scotch Whisky Association.

Nearly three quarters of the cost of a bottle of Scotch Whisky in the UK is claimed in tax, with the UK having the highest rate of duty on spirits in the G7 and fourth highest in Europe.

The Scotch Whisky industry generates £7.1 billion a year for the economy, according to the latest data, and is one of the UK’s genuinely world-leading industries.

The body is calling on the government to cut alcohol duty in the upcoming, closely-watched budget on March 6.

Chancellor Jeremy Hunt is expected to cut a raft of taxes ahead of an election later this year.

Graeme Littlejohn, Director of Strategy and Communication at the Scotch Whisky Association, said: “The government’s own figures show that year after year the official forecasts have underestimated the boost that freezes and cuts to spirits duty can give the economy. By cutting duty in the March Budget, the Chancellor can turbocharge tax receipts, and incentive the UK’s world-class spirits industry, led by Scotch Whisky, to invest in the economy through jobs, capital projects and future growth.

“The Chancellor has said that he believes that low-tax economies are more dynamic and generate more revenue for public services. These figures once again show the benefit of supporting the Scotch Whisky industry and that the right decision for the industry and the economy on 6 March is to deliver only the 5th cut the spirits duty in the last 100 years,” he added.

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