Joint letter from the Gin & Vodka Association, the Scotch Whisky Association, and the Wine & Spirit Association

20th February 2004

Dear Sir,

The Chancellor is considering the introduction of tax stamps in the UK as a measure to tackle spirits fraud and has set industry the challenge to come up with an effective alternative.

Spirits producers and the wider alcohol trade are totally committed to tackling fraud; it damages business and brand building efforts.  But tax stamps are not the answer.  They only have limited effectiveness.  Worldwide, several countries have withdrawn or pulled back from using them.

Where large sums of money are involved, forgers inevitably follow.  Tax stamps - even the most sophisticated - are relatively easy to fake.  In January, for example, the Ukraine modernised its stamp system to tackle widespread fraud. Within 3 weeks, over 60,000 bottles had been seized, each with forged state of the art hologram seals. 

So what do we believe will be effective?  Close co-operation between Customs & Excise (C&E) and industry must be the first response.  This has already proved to show dividends in reducing fraud.  Building on this, the spirits industry and other interested parties across the distribution chain have developed a risk-based package of alternative measures.  By introducing a tighter system of guarantees, strengthened warehouse and licensing controls, and making better use of existing 'track and trace' systems, we can squeeze out the fraudster.  We have also identified ways to work still more closely with C&E to focus resources on high-risk storage, sales and movements.

This package of measures is a proportionate response to fraud.  In contrast, tax stamps would impose significant additional costs - running into millions of pounds - on legitimate producers and traders, damaging productivity and competitiveness.  Even if the government offers ways of off-setting these costs, small companies may bear an unreasonable and disproportionate burden. 

Our package may secure more revenue for the Treasury than tax stamps.  And, they will deliver quicker than tax stamps.  Just as importantly, these benefits will be more enduring. While a stamp can be forged, the trade proposals are multi-faceted and more robust.  Working together, government and trade, we think these alternatives to tax stamps present a win-win situation for all concerned.

Edwin Atkinson, director-general, Gin & Vodka Association

Gavin Hewitt, chief executive, Scotch Whisky Association

Quentin Rappoport, director, Wine & Spirit Association