The tax gap is largest on beer

The 'tax gap' is largest on beer

The size of the illicit market for alcohol in the UK shrunk last year, but remains significant, according to latest Government estimates. 

An HM Revenue & Customs report, published on Friday (11 October), revealed that the estimated 'tax gap' fell from GBP1.1bn (US$1.76bn) in 2010/11 to GBP700m in 2011/12. The 'tax gap' is defined as the difference between duty that should be collected against what is actually received. 

The study estimates the size of the illicit market to be around 6.6% of the total sector, down from 11% in 2010/11. 

Beer has the largest illicit market in the UK, according to the figures, with hidden transactions accounting for 9% of the market. This figure has remained relatively stable since 2007/8. The 9% gap represents around GBP550m in lost revenue, HMRC said. 

The illicit market for wine was estimated to be 6% in 2011/12, with a loss of sales of GBP350m. This is a fall from 12% in 2010/11, according to estimates. 

For spirits, the size of the hidden market was around 3%, representing lost sales of GBP120m, the figures showed. 

Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “Fraud is an area of great concern to our members. Not only does fraud undermine the competitiveness of legitimate businesses, it costs the Government and taxpayers vital revenue.

“The WSTA will be raising the findings of the report with Government to discuss their accuracy, to consider the reasons for fraud, including the impact of the alcohol duty escalator, and to look at solutions that support the legitimate trade.”