Letter to the Committee from the Director
of Government and Consumer Affairs, The Scotch Whisky Association
TAX COMPARISON SCOTCH WHISKY CHARGED AT WINE
1. I refer to our telephone conversation
in which you asked what the impact would be on the price of a
bottle of Scotch Whisky if the duty on Scotch was to be charged
at the wine rate. I thought it prudent to await the outcome of
the Budget before replying.
2. There are a number of complications/assumptions
that are required to be overcome in order to answer this question,
but the short answer is £8.81 compared witha price
of £10.70 now. I hope the following explanation is sufficiently
clear to lay out the reasoning behind the final answer.
3. The main obstacle to providing a quick
and clean solution is that the present convoluted duty system
lays down duty in a different fashion for spirits and wine. Spirits
are assessed on the basis of £ per litre of pure alcohol,
while wine is charged at £ per hectolitre of product.
4. With the present spirits rate of £19.56
per lpa, a bottle of Scotch Whisky at 40 per cent abv attracts
duty of £5.48. By comparison all wine between 5.5 per cent
and 15 per cent abv faces a duty rate of £154.37 per hectolitre,
irrespective of the alcoholic strength within that abv range.
5. To make a meaningful calculation therefore
it is necessary to (a) convert the wine rate to xp per cl of pure
alcohol, which at the present rate of £154.37 per hectolitre
is 13.78p. (To do this calculation we need to assume an alcohol
strength for wine. I have selected 11.2 per cent abv as a pub
serving at this strength contains the same amount of alcohol as
a pub serving of Scotch Whisky); (b) compare the bottle price
of Scotch based on this figure with the existing bottle price.
6. Thus, Scotch Whisky duty at the present
wine rate is:13.78p x 40 per cent abv x 70cl (legal bottle size)
This compares with £5.48 duty a bottle
7. To make a true comparison between the
current price and the "revised" (ie wine rate price)
we also need to consider the impact of VAT, as this is levied
on the excise duty element of the price as well as on the producers/retailer
|Present duty rate per bottle
|VAT on duty @ 17.5%||0.96
|Assume retail price||£10.70
|Less duty and VAT on duty||6.44
|4.26|| includes VAT of|
|"Revised" duty rate per bottle
|VAT on producer/retailer element||
|Plus producer/retailer element||
Thus, by applying the present wine rate to Scotch Whisky
the price of a typical bottle comes down by £1.89.
8. Calculating the duty on all drinks at the same rate
according to alcohol content is, as you will be aware from our
submission, the only fair duty system.
9. I hope the above is helpful, but please do not hesitate
to contact me if you require further information.
The Scotch Whisky Association