- Published on Wednesday, 29 August 2012 09:36
- Written by Gemma McKenna
The lack of accurate data on wine duty fraud is "unacceptable", HMRC has warned, as new figures show up to £1.2 billion is being lost in unpaid duty.
In a report published today by the Commons Public Accounts Committee, HMRC said a lack of information on the problem of alcohol duty fraud was hampering its investigations.
Richard Bacon MP, member of the Committee of Public Accounts, said: "Alcohol fraud is big business. The department estimates that the gap between taxes due on alcohol and the amount actually collected might be as large as £1.2 billion.
"The department does not, however, have enough reliable information on the returns from tackling different types of alcohol duty evasion. It cannot say, therefore, whether a more effective targeting of its resources might not secure a better return on its investment.
"It is unacceptable that the department has still to produce an estimate of the tax gap for wine, despite a commitment to this Committee's predecessors to do so. The absence of information on the scale and nature of wine duty fraud undermines the basis on which the Department directs its resources to tackling the problem."
The report calls for the government to "strengthen its intelligence" on criminal gangs who operate across international borders and to pursue duty criminals more actively through the court system. In the last four years, there were just six successful prosecutions a year. Bacon said this sent the "wrong message to perpetrators and the wider public".
Bacon was speaking as the Committee published HM Revenue and Customs: Renewed alcohol strategy, which examined the progress in implementing the revised Renewed Alcohol Strategy since April 2010.
The strategy's aim was to cut the amount of tax lost each year due to alcohol duty evasion, principally through fraud which often involves exporting duty unpaid alcohol to the near continent, which is then redirected to the UK and released to the market with no duty paid.
The department is consulting on a range of measures to reduce alcohol duty fraud, including a proposal to introduce fiscal stamps for beer, an approach which is already used on spirits. But HMRC admitted it does not yet have a full understanding of the costs and benefits of these proposals.
Miles Beale, chief executive of the Wine & Spirits trade Association, said: “Many in the trade would like to see tougher action to clamp down on alcohol fraud. Fraud undermines legitimate businesses and short changes both consumers and taxpayers. Through the WSTA’s fraud prevention unit we and our members are doing all we can to help the authorities with information where there is suspected illegal activity taking place.”
Andy Tighe, director of brewing at the British Beer & Pub Association, said: "The PAC is right to say that HMRC must do a great deal more enforcement, get tough in prosecuting criminal smugglers, and develop better links with industry.
"Overall, the PAC report supports the view that no one has a clear picture of the scale of the alcohol fraud problem - and HMRC can't therefore judge the effectiveness of potential solutions. When it comes to policies that would damage British business and consumers, this is a worrying place to be. HMRC should drop its tax stamp plans, and work with everyone in the supply chain, through a new taskforce, to tackle the problem."
The Federation of Wholesale Distributors’ chief executive James Bielby said: “Our members have submitted figures, both to the PAC and the concurrent HMRC consultation, which reveal the huge impact of illicit beer on their profitability. In the first five months of this year, members’ sales fell by 12%, at a time when consumers are buying more from their local shops. There is a clear need for prompt action to prevent this enormous growth in illicit supply.”
But Bielby said beer and wine should be examined separately as supply chains were very different.
He added that while criminals were operating “with little fear of being caught” pursuing them in the courts was a “long, expensive and resource-heavy process”. He said fiscal marks would “represent an effective alternative to prosecution”.