Further supplementary memorandum from
the Gin and Vodka Association of Great Britain
RECTIFYING CROSS BORDER SHOPPING AND ILLEGAL IMPORTS
SWITZERLANDA TEST CASE
1. As mentioned to the Committee in the
oral evidence given by the Gin and Vodka Association on 17 January
2001, the prime cause of cross border shopping and illegal imports
is the large differential in excise tax between the UK and its
neighbours. The UK is not the only country to experience this.
The most striking example is Switzerland.
2. Until July 1999, Switzerland had a discriminatory
tax on imported spirits up to double the tax on home-produced
spirits. As a consequence, a large differential in tax was created
between Switzerland and its neighbours. In turn, cross-border
shopping grew to significant proportionsthe Federal Government
calculated that legal imports amounted to 20 per cent of all spirits
consumed in Switzerland and illegal imports were probably the
3. In July 1999, the tax was reduced by
about half to the domestic level, bringing Switzerland into line
with French rates and reducing the premium compared to other neighbouring
countries such as Germany. The result has been that cross-border
shopping was virtually eliminated and the volumes of sales in
Switzerland have more than doubled.
4. Government profits
collected by the Federal Alcohol Office on alcohol (nearly all
excise duty on spirits) rose in the first year (1999-2000) to
CHF245.3 mn, 10 per cent higher than in the peak year before.
In the year since then, revenue has been up by a further 7 per
5. An opinion may be expressed that Switzerland
is land-locked and is, therefore, different from an island such
as UK. But tax and tax evasion are no respecters of borders. A
differential is a differential and enough time has elapsed for
sufficient statistics to be gathered by the Swiss authorities
to prove the point.
6. Of the European countries with high excise
on spirits and large differentials with their neighboursDenmark,
Finland, Norway, Sweden and the UKthe latter is the only
country not to have a review of such taxation underway.
The Gin and Vodka Association
10 The figures include revenues from Government revenues
from selling ethanol of about CHF9 mn and a small amount of duty
on beer (there is no wine duty). Back