C&E 2
7 March 2001
ALCOHOL AND TOBACCO DUTIES
Duties on spirits, beer and wine will be frozen and tobacco duties increased in line with inflation, the Chancellor announced today. The Government also underlined its commitment to crack down on criminal smuggling and fraud.
Alcohol
Spirits duty will be frozen to strengthen the international competitiveness and domestic base of the UK spirits industry. The Government has now frozen spirits duty for four Budgets in a row. Without those duty freezes, spirits would have been 60 pence a bottle more expensive than they are today.
Duties on beer, wine and other alcohol will also be frozen.
Small breweries
The Government also announced today that it is minded to introduce a reduced rate of duty on the beer produced by small breweries, and will be considering the scope for doing so over the coming year, to provide support to the nation's small brewing industry.
Tobacco
Tobacco duties will rise in line with inflation to maintain the real cost of cigarettes and thereby support the Government's objectives to reduce smoking. Tax on a typical packet of 20 cigarettes will go up by 6 pence from today.
The Government also today published the latest encouraging results from its strategy to reverse the growth in tobacco smuggling over the next three years.
DETAILS
Alcohol
1. The duty on spirits has been frozen for the fourth consecutive year to strengthen both the international competitiveness and domestic base of the UK spirits industry. Duty on spirits is now 36 per cent lower in real terms than it was 20 years ago.
2. Duties on beer, wine, cider and other drinks will be frozen.
3. The Government has received proposals from the Society of Independent Brewers, supported by the Council for the Protection of Rural England, the Villages Retail Services Association and other groups, for a ?Progressive Beer Duty? scheme, which would reduce the duty payable by smaller brewers in line with the volumes of beer they produce. The Government is minded to introduce such a scheme and will be considering the scope to do so over the coming year.
4. The Government also announced that it would be tackling a tax avoidance practice where cider is diluted to decrease its strength and increase its volume, reducing the duty liability on the volume of finished product. Legislation will be introduced to outlaw this practice. This has the full support of the National Association of Cider Makers.
5. The estimated revenue cost of this alcohol package is £90 million against an indexed base in 2001/02. The RPI impact is estimated to be nil.
Tobacco
6. Smoking is the single greatest cause of preventable illness and premature death in the UK, killing 120,000 people every year. The duty on cigarettes has so far risen by 30 per cent in real terms since May 1997, encouraging existing smokers to smoke less or quit, and discouraging children and young people from taking up the habit, thereby helping to prevent many more premature deaths. Maintaining the real price of cigarettes and tobacco supports these vital health objectives.
7. The tax on tobacco (including duty and VAT) is therefore increased in line with inflation from 6pm today by:
- 6 pence on a typical packet of 20 cigarettes;
- 2 pence on a pack of 5 small cigars;
- 5 pence on a 25 gram pack of hand-rolling tobacco; and
- 3 pence on a 25 gram pack of pipe tobacco
8. The estimated revenue cost of these changes is nil against an indexed base.
Smuggling
9. Figures published today show that - while tobacco revenues for 2000-01 will exceed their forecast after several years of falling short - tobacco smuggling remains a serious threat to the revenue and to the Government's health objectives, and brings with it widespread and serious criminality. Last March, the Government announced its Tackling Tobacco Smuggling strategy, which is designed first to slow the growth in tobacco smuggling, which has been on a strong upward trend, and then to put it into decline within three years. The strategy provided £209 million for investment in extra staff and new equipment.
10. Over the past year, Customs have been increasing deployment of front-line staff and investigators. By the end of April, 650 extra staff will be in post, and a further 300 new staff will follow over the next year. Customs have also been putting in place X-ray scanners designed to detect bulk consignments of smuggled tobacco: three scanners are already in operation; two more will follow shortly; and a second series will be ordered over the next few months.
11. This strategy is at an early stage but is beginning to show results. In the first nine months of 2000-01, Customs have seized more than 2.1 billion cigarettes destined for the UK market: 1.4 billion in the UK itself; and 700 million through joint operations with overseas enforcement agencies. The X-ray scanners are also starting to pay dividends: in just a few weeks of operation, the first three scanners were responsible for the seizure of over 13 million cigarettes and over a tonne of hand-rolling tobacco.
12. Customs investigators have broken up 38 major organised crime gangs involved in the smuggling and supply of huge volumes of illicit cigarettes. Customs? tough policy on vehicle seizures is also having a powerful effect - making smugglers realise the cost of using their vehicles to transport illicit goods. In the first nine months of 2000-01, Customs seized almost 6,700 vehicles, up over 90 per cent on the same period last year.
13. As announced in Budget 2000, ?UK duty paid? marks are being introduced on packets of cigarettes and hand-rolling tobacco to help in the identification of smuggled goods. From 1 July 2001, it will be a criminal offence to transport, sell, offer for sale or allow the use of premises for the sale of unmarked cigarettes and tobacco. This will deter individuals and retailers from selling unmarked goods, and encourage owners of pubs and managers of workplaces to prevent sales taking place on their premises.
14. Smuggling is provisionally estimated to have accounted for 22 per cent of the UK cigarette market in 2000, close to Customs? target of 21 per cent. The strategy is in its first year, and as more front-line staff are put in place, new X-ray scanners come on line, and pack marks are introduced, Customs will be able to take even more effective action against the criminals involved in tobacco smuggling.
NOTES FOR EDITORS
1. The duty on cigarettes has ad valorem (per cent of price) and specific (per cigarette) elements. Raising the specific duty by approximately 2 per cent and maintaining the ad valorem duty at 22 per cent increases the total duty by about 1.8 per cent in line with inflation. The duties on all other tobacco products are wholly specific.
2. Revalorisation is an uprating in line with inflation applied to keep duties, benefits and allowances constant in real terms. Excise duties use the forecast RPI figure for the September following the Budget. Allowances against tax use historic RPI to the September preceding the Budget. In Budget 2001 the forecast RPI, based on Q3 2000 to Q3 2001, used for excise duties is 1.8 per cent whereas the historic RPI to September 2000 is 3.3 per cent.
3. In Budget 2000 the Chancellor announced new three year spending plans for NHS spending. The proceeds from the 5 per cent real increase in tobacco duties in Budget 2000 contributed to the additional £2 billion health funding for 2000-01 and to the increased allocations for the NHS up to 2003-04.
4. Details for businesses are published in Budget Notices BN 90/01 (cider dilution) and BN 89/01 (tobacco duties). These are available from Customs and Excise Business Advice Centres and from the Customs and Excise Internet site.
HM Customs and Excise Press Office:
Media enquiries to:
020 7865 5471 / 5472 (out of hours: 020 7620 1313).
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