HM Revenue and Customs (HMRC) has come under fire for failing to tackle alcohol tax fraud in a report from the Commons Public Accounts Committee. It is estimated that as much as £1.2 billion is lost each year from alcohol duty evasion.
The main source of tax evasion reportedly comes from beer intended for oversees export, but ends up illegally diverted to the UK or re-imported without duty paid. The committee's report says three times as much beer is exported to Europe than is actually sold there. But no figures were available for the lost duty on wine.
Total tax revenue from excise duties on alcohol in 2010-11 was £9.5 billion, so the £1.2 billion tax gap is sizeable. Last year it was reported alcohol fraud was rising, with illicit beer accounting for up to 14% of total UK sales. HMRC has a 'tackling alcohol fraud strategy' and a Smuggling hotline (0800 59 5000).
The MP's report also warns of the low numbers of successful prosecutions for alcohol duty fraud. In the four years from 2006-07 to 2009-10 the highest number of successful prosecutions in any one year was six, with only 20 in total over the four year period. The report warned that HMRC "does not take enough account of the deterrent effect of successful prosecutions."
HMRC are considering a range of measures to reduce alcohol duty fraud, including a proposal to introduce fiscal stamps for beer, which appears to have been successful in reducing duty evasion on spirits. A British Beer & Pub Association (BBPA) press release opposed the stamps due to the cost impact on businesses but supported the call for tougher enfrocement.
See reports from the BBC, Morning Advertiser and Telegraph.
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