"HMRC has estimated that the evasion of
alcohol duty could have cost the taxpayer over £1 billion in
2009-10 – and the level of fraud is on the rise. While the renewed
strategy to deal with this is more comprehensive than what went
before, and the Department has had some early notable successes, it
needs to do better in a number of areas. This includes establishing
reliable estimates of the tax gaps for beer and wine; and achieving
tangible success in tackling the illicit diversion of duty unpaid
alcohol back into the UK
market."
Amyas Morse, head of the National Audit Office, 25
January 2012
HMRC’s renewed strategy for dealing with
alcohol duty fraud, now covering wine and beer as well as spirits,
is a significant improvement on the previous strategy and the
Department has achieved some of its early objectives. However, a
report released today by the National Audit Office has found that
there has been no tangible success achieved in working with
industry to disrupt the illegal diversion of duty-unpaid alcohol
back into the UK market. There has also been a low level of
criminal sanctions against fraudsters.
The Department estimates that the amount lost
to alcohol duty evasion could be as much as £1.2 billion in
2009-10, a significant rise from £850 million in 2008-09. HMRC
launched its current strategy in April 2009, to take effect from 1
April 2010, but it has no explicit objective to increase the number
and impact of criminal investigations and prosecutions. There is
also insufficient quality, depth and analysis in the performance
information used to inform delivery of the strategy.
HMRC exceeded its key financial objective for
2010-11. The Department set itself a number of key performance
outcomes for the year and achieved a number of these, including its
principal financial target, achieving £433 million of financial
benefits against a target of £390 million. But analysis by the NAO
indicates that £43 million of the total £476 million reported as
financial benefits were not defensible because of poor quality
assurance processes.
According to today’s report, there has been no
success in reducing the volume of alcohol legally moved to other EU
countries with excise duties unpaid, but then diverted back into
the UK for illegal sale. The Department has recorded increased
revenue from agents participating in the new Registered Consignee
scheme. However, its scheme requiring traders to provide financial
guarantees for the duty on alcohol being moved has been less
successful as the guarantees required by the Department are far
lower than the value of the duty on goods being moved. HMRC has
made minimal progress working with industry to secure alcohol
supply chains.
In each of the four years to 2009-10, there
were convictions in just six cases or fewer for suspected alcohol
duties fraud. The Department considers civil sanctions more
effective in some cases. During 2010-11, the quantity of alcohol
seizures increased to almost 10 million litres – an increase of 61
per cent.
Publication details:
HC: 1702, 2010-2012
ISBN: 978010297534