UK counts cost of illicit alcohol

The illicit wine market could have cost the UK up to £700 million in revenue losses last year, according to the first ever estimates on this category to be released by HM Revenue & Customs.

Measuring Tax Gaps 2013 suggests that associated revenue losses for the wine sector in 2011/12 were £350m but “possibly as high as £700m.” The report suggests that illicit wine holds a 6% share of the market, a decline from its recent peak of 12% in 2010/11.

The report also looks at the illicit spirits market, which it valued at £120m last year, or a 3% share of the market, although it also offered an upper value estimate of as much as £490m. This falls at the lower end of a market share which has fluctuated between 2% and 6% since 2008/9.

That proportion rises for beer, where illicit production held a 9% share of the market in 2011/12, resulting in an estimated revenue loss of £550m.

Highlighting fraud as “an area of great concern to our members,” Miles Beale, chief executive of the Wine & Spirit Trade Association, added: “Not only does fraud undermine the competitiveness of legitimate businesses, it costs the government and taxpayers vital revenue.

Beale confirmed that the WSTA would raise the report’s finding with the government “to discuss their accuracy, to consider the reasons for fraud, including the impact of the alcohol duty escalator, and to look at solutions that support the legitimate trade.”

Measuring Tax Gaps 2013 details the difference between the amount of tax which should be collected by HMRC and the amount it actually collects. The former figure is based upon total consumption figures from the Living Costs & Food Survey, while is compiled by the Office for National Statistics.

This gap in alcohol revenue, part of a £35 billion hole in the UK’s accounts, can be attributed to a variety of causes, including duty evasion to counterfeit alcohol production.