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Published:  23 July, 2008

By Jack Hibberd

The UK spirits trade's alternative proposal to the introduction of spirits tax stamps in 2006 contained a number of inherent weaknesses' that meant its anti-fraud impact would fall significantly short of that estimated for tax stamps', said HM Customs and Excise this week. The industry bodies charged earlier this year with formulating a counter-proposal to tax stamps reacted angrily to Gordon Brown's confirmation of the controversial scheme in last week's Budget and maintain that their anti-fraud measures offered an effective solution to fraud, and more money, more quickly than tax stamps'. The Government estimates that stamps will increase tax revenue by 160 million a year while the industry proposals (which were based on closer cooperation with Customs and tighter movement and warehousing controls) would increase revenues by only 70 million. Despite a freeze on spirits duty for the seventh year running and a raft of proposals to minimise the cost of compliance' (see panel, left), Gavin Hewitt, chief executive of the Scotch Whisky Association (SWA), claimed tax stamps will damage Scotch whisky's competitiveness at home and abroad and do little to combat fraud [due to the ease of forgery]'. Quentin Rappoport, director of The Wine and Spirit Association (WSA), said that the introduction of the scheme is an especially big hit for smaller businesses, of which there are many in this sector. In a Budget claiming to support small firms and encourage enterprise, this announcement is a cruel irony.' This point was echoed by Bill Oddy, managing director of The Drinks Company: For small importers like me, this is a nightmare. Our costs will rocket and the chancellor's offer of 3 million aid to help small firms with capital costs is totally out of proportion to the impact tax stamps will have in our sector. The irony is it favours the large established multinationals whose high-profile consumer brands are most easily traded on the black economy.' Customs' basis for rejecting the trade's proposals were that they leave the door open to other types of fraud...and do not distinguish readily [by sight] between licit and illicit products.'