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Published:  23 July, 2008

By Jack Hibberd

The spirits industry has the next few months' to come up with a compelling' alternative to tax stamps on spirits bottles or the government must and will' introduce them from 2006, according to John Healey MP, Economic Secretary to the Treasury and Customs Minister. Despite the industry uniting in condemnation of the proposed tax stamps, Healey said in a letter to the trade (see right) that fraudulent spirits are a growing problem and organised criminal gangs' must be stopped. The Scotch Whisky Association expressed its disappointment and surprise' over the possible introduction of the stamps and went on to attack the government's estimates. If the figures are correct, over 200,000 bottles are being sold illicitly in the UK each day. At that level we would notice market disruption,' said Scotch Whisky Association (SWA) public affairs manager David Williamson. The government's estimate that implementing the stamps will cost the industry no more than 20 million were also dismissed. The Wine and Spirit Association (WSA) said stamps would cost 250 million to introduce and reduce bottling-line efficiency by 10% or, if applied manually, add 1 to the cost of every case. Producers would need to buy tax stamps (strips of hologram paper, with a number code proving duty has been paid, that are applied over the top of the bottle) in advance at a cost of 5.48 each. This would place a high cash-flow and security burden on smaller distilleries, the organisation said. We were disappointed when the government announced it was going ahead with this,' added WSA director Quentin Rappoport. We had no warning, even though we had been working with HMCE on a number of ways to tackle fraudsters. This is not the way that tax avoidance should be dealt with. It will be difficult to police, easy to forge and an unnecessary expense for the industry.' Hugh Morrison, former chief executive of the SWA, said that tax stamps have proved a failure elsewhere in the world. In Poland, 80% of the market is contraband. Despite the use of strip stamps, whisky is either smuggled in or sold with a forged stamp,' he said. The US, Ecuador, Greece, Germany, Belgium and Norway have all either withdrawn or pulled back from using them because they are so utterly ineffective.' Rappoport added: We have around three months to find an alternative and are with the trade to do so. We put forward a package before this was announced and I still think it is the best way forward.' Additional reporting by Josie Butchart