A Scotch Whisky Bottle Tax, Will it Work?

Scotch Whisky Bottle TaxA rather more serious post for today. A Scotch Whisky Bottle Tax has been proposed as a way of raising extra revenue.

Two economic advisors to the Scottish Parliament put forward this idea based on information from 2008 but also from estimates of 2011 figures. these show a year on year growth in the industry and its overall value to the Scottish economy. The proposed tax would provide a means of raising this revenue. What does it mean to you though?

This is when we get to the “dry” bit, that is with figures, not literally! The formulation for adding the extra tax is not quite so straightforward as it sounds.

What Would a Bottle Tax Mean?

For example if the tax was added to each bottle but the extra amount came off profits and was not passed on to the customer then the company would not pay as much corporation tax.

On the other hand if the tax was added to the cost to the consumer then this would probably lead to a drop in demand and sales and be counter productive. These two factors are what the advisors were trying to take into account, along with a figure for the level of the bottle tax.

Biggar Economics (the group behind the research) estimate da 0.43% drop in sales for every 1% increase in price, which does not sound enormous but when you consider that upwards of 1.3 billion bottles of Scotch Whisky are shifted every year then it is not just a drop in the ocean.

From the BBC http://www.bbc.co.uk/news/uk-scotland-20946409

Graeme Blackett’s analysis suggests the following impact if a bottle tax were absorbed by profits:

A 10p per bottle tax would raise £135m and reduce corporation tax revenue by £31m – with a total revenue of £104m.

A 50p per bottle tax would reduce corporation tax by £155m – with total revenue of £520m

A £1 per bottle tax would cut corporation tax by £310m – leading to a total tax take of £1.039bn.

However, if all the cost of the tax were handed over to consumers, the analysis suggests:

A 10p rise per bottle would cut demand by about 6m bottles, it is estimated. Counting less corporation tax, excise duty and VAT would leave £128m in revenue.

A 50p rise for consumers, would cut demand by 31m bottles, and the tax take could be £626m.

A £1 tax would reduce demand by 61m bottles, resulting in tax revenue of £1.222bn.

There are a lot of unknowns in all this and of course the distillers might choose to mix the loading for themselves and the consumer.

My Thoughts

Personally a Scotch Whisky bottle tax leaves me with mixed feelings, anything likely to raise the price of my favourite tipple is not at all welcome.

What do you think? Please feel free to comment or share with your friends.

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8 Responses to A Scotch Whisky Bottle Tax, Will it Work?

  1. Dave says:

    Not sure I like the idea of anything that would increase the cost of my favourite tipple either.

    • Roger Shann says:

      Some times enough is enough. not living in Scotland (yet) I have no say in this through the ballot box. it may not be accepted I hope

  2. Hey, I have an idea, let’s tax politicians, or better yet, make them illegal!

  3. Jim says:

    Creative taxation! What exactly is the difference between a liquor tax and a bottle tax. One is newer and has potentially more saleability, in essence, nothing!

    • Roger Shann says:

      Exactly Jim, except that this would be added to bottle for export whereas at the moment they are exempt from UK taxation (well some of it anyway)

  4. John Stewart says:

    I’m for one am really tired of everything we do or use being taxed. The politicians need to live within their means like the rest of us do

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