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New whisky tax ‘would raise £1bn for Scotland’

A NEW “tartan tax” should be levied on every bottle of whisky to bring a £1  billion boost to the Scottish Government’s coffers, senior SNP advisers have demanded.

Professor John Kay and Sir George Mathewson have both served as members of First Minister Alex Salmond’s Council of Economic Advisers and believe that an extra tax on every bottle of whisky would help Scotland share in the global success of the country’s most famous export.

Prof Kay, who advocates a £1 per bottle charge, said the benefits going to Scotland from recent export success, notably to emerging markets in South America and Africa, had been “disappointing”. He makes the claim in a BBC Scotland programme Scotched Earth being broadcast on Wednesday.

The programme claims that the whisky industry is thought to be worth £5  billion when the produce leaves distilleries. From that, about £500 million is spent on paying around 11,000 employees and supplies are estimated to cost around £1.5 billion, leaving a £3 billion profit for the producers.

Prof Kay does not believe a new tax would lead to a fall in demand if distillers absorbed the extra cost instead of passing it on to drinkers and tells the programme: “I think the benefits to Scotland from the whisky industry are really quite disappointing. The largest producers are not based in Scotland. Their profits go mostly to people who are not resident in Scotland. They don’t pay much tax in Scotland and we don’t think they pay much tax in the UK.”

Sir George is the former chairman of Mr Salmond’s economic advisers and was previously chairman of the Royal Bank of Scotland. He said a 50p per bottle tax may lead to higher prices but argued that “would not be a major percentage of the sales price”. “It would seem to me there’s room there for something,” he said. “I don’t believe it [the industry] would be substantially harmed and I believe that the success could be spread around a little more.”

The industry is angrily resisting the move. Peter Lederer, director of Diageo, the drinks giant, which has headquarters in London and is also listed on the New York stock exchange, said a new tax would send the wrong signals to those thinking of investing in the Scottish economy.

He said: “If the argument in an economy is to take a successful business and keep taxing it because it’s successful, [that] gives the wrong impression.”

Gavin Hewitt, chief executive of the Scotch Whisky Association, said that Scottish-made whisky is competing in tough international markets, where it is up against other whiskies and spirits.

He told the programme: “I cannot see why any government would apply a production tax which would make Scotch whisky less competitive overseas against other drinks which are cheaper to produce and cheaper to sell. We have already enjoyed over a billion pounds of investment into Scotland in the last four years.

“I will put my head on the block now and say that we’re going to enjoy £2  billion of investment in the Scotch whisky industry in the next three to four years.”