Select Committee on Scottish Affairs Minutes of Evidence

Further supplementary memorandum from the Gin and Vodka Association of Great Britain


  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 proportions—the Federal Government calculated that legal imports amounted to 20 per cent of all spirits consumed in Switzerland and illegal imports were probably the same again.

  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[10] 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 cent.

  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 neighbours—Denmark, Finland, Norway, Sweden and the UK—the latter is the only country not to have a review of such taxation underway.

The Gin and Vodka Association

February 2001

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

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