Public Accounts Committee criticises HMRC over failure to tackle alcohol duty fraud

MPs have criticised Her Majesty’s Revenue and Customs (HMRC) for its failure effectively to combat evasion of alcohol duty on beer and spirits, which is estimated to cost the Treasury up to £1.2 billion each year. One of the MPs’ criticisms is that HMRC still do not know how much duty evasion there is on wine products. The House of Commons Public Accounts Committee Report on HM Revenue and Customs: Renewed alcohol strategy also critics HMRC for failing rigorously to prosecute alcohol fraudsters.

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. Alcohol fraud is big business. The Department estimates that the gap between taxes due on alcohol and the amount actually collected might be as large as £1.2 billion. 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.

“It is unacceptable that the Department has still to produce an estimate of the tax gap for wine, despite a commitment to this Committee’s predecessors to do so. 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.”