MPs slam HMRC for failing to effectively tackle alcohol fraud

28-Aug-2012 - Last updated on 12-Mar-2017 at 02:40 GMT

A group of MPs have slammed HM Revenue and Customs (HMRC) for failing to effectively tackle alcohol fraud and have claimed the Government department does not understand the implications for the industry of introducing fiscal stamps on beer bottles.

The Public Accounts Committee (PAC) has put it views forward in a report, published today, and based on evidence from HMRC, on its progress in implementing the revised Alcohol Strategy since April 2010.
However, PAC has accused the HMRC of a number of major failures in its strategy towards alcohol.
In particular, it has accused HMRC of failing to take into account the “deterrent effect of successful prosecutions” against criminal gangs who perpetrate alcohol fraud.
The PAC also highlighted that the HMRC does not have enough information on which to base its policy towards fighting duty alcohol, such as its plans to introduce duty stamps on beer bottles, cans and containers below 10 litres.
PAC is particularly concerned that there has been no estimates on the tax evasion for wine and without reliable information PAC argues the HMRC cannot “tailor its approach to target its efforts to tackle evasion”.
Richard Bacon MP, member of the Committee of Public Accounts, said: “HMRC’s drive to tackle alcohol duty evasion is being seriously hampered by a lack of information.
“The department does not, however, have enough reliable information on the returns from tackling different types of alcohol duty evasion. It cannot say, therefore, whether a more effective targeting of its resources might not secure a better return on its investment.
“The absence of information on the scale and nature of wine duty fraud undermines the basis on which the Department directs its resources to tackling the problem.
“Since the criminal gangs who perpetrate major alcohol duty fraud operate across national boundaries, the Department needs to strengthen its intelligence by developing better links with the industry, the UK Border Force and other EU Member States.
“The department seems to be reluctant to prosecute offenders. Over a recent four year period, there were successful prosecutions in no more than six cases a year. This sends the wrong message to perpetrators and the wider public about the Department’s commitment to reducing alcohol duty evasion. It should give more weight to the deterrent impact of pursuing perpetrators through the courts.”
Other accusations from the committee against HMRC:

HMRC does not make best use of intelligence and technology to detect and prevent alcohol duty evasion.
HMRC needs to work more closely with the industry to improve its understanding of legitimate export markets, and improve how it works with the UK Border Force to gather intelligence on illegal alcohol imports.
HMRC does not yet use the full capability of the Excise Movement Control System (EMCS), which facilitates the tracking of freight across the European Union, and could be used to target interventions and investigations more effectively. The Department implemented EMCS in phases over two years as planned, but did not make full use of its capabilities when implementation was completed.
It highlighted that in the four years from 2006-07 to 2009-10 the highest number of successful prosecutions in any one year was only six and the highest number of defendants was 16.

British Beer & Pub Association reaction:

Andy Tighe, Director of Brewing at the British Beer & Pub Association, said: “The Public Accounts Committee is right to say that HMRC must do a great deal more enforcement, get tough in prosecuting criminal smugglers, and develop better links with industry, something the BBPA has offered, though the setting up of a new task force, in our recent response to the Government’s consultation.
“We also agree with another key conclusion, that HMRC “does not have accurate data on the size of the tax gap.” Without reliable data on the scale and nature of duty evasion for each category of alcohol (beer, wine and spirits), the Government must not move forward with hugely damaging and costly plans to put a tax stamp on every bottle and can of beer. Tax stamps have been tried with spirits, and it is unclear how successful they have been – HMRC continues to seize more spirits than beer, in revenue terms.”
“Overall, the PAC report supports the view that no one has a clear picture of the scale of the alcohol fraud problem - and HMRC can’t therefore judge the effectiveness of potential solutions. When it comes to policies that would damage British business and consumers, this is a worrying place to be. HMRC should drop its tax stamp plans, and work with everyone in the supply chain, through a new taskforce, to tackle the problem.”