International Whisk(e)y Day

I am never quite sure who it is that designates which days of the year are assigned to various celebrations. I note that June 4th is World Cheese Day, and July 7th is International Chocolate Day. On March 27th, however, we celebrate International Whisk(e)y Day. That peculiar spelling is there because Scottish, Japanese and Canadian whisky is spelled without an ‘e,’ whereas American and Irish whiskey does include one. Despite the intense rivalry between the different types of whiskies, we are meant to celebrate all of them on March 27th, and perhaps to hunt down the bars that are offering specials on the drink.

Whisky (or whiskey) is a distilled alcoholic beverage made from fermented grain mash. Several types of grain may be used, depending on the country and the style. It is usually aged in oak casks. The name derives from the Gaelic version of “water” or “water of life,” corresponding to the Latin “aqua vitae.” The drink itself is several centuries old in both Scotland and Ireland, but so, unfortunately, is the taxation that authorities extracted from its production. At one stage it was estimated that half of all whisky in Scotland was produced illegally in homemade stills, and done at night so the smoke from the stills would not be seen. This gave it the nickname of ”moonshine.”

While most moonshine has now disappeared, the tax that instigated it has not. The Treasury has discovered a delightful way to extract even more from it. First they put on an excise duty, then on top of that they levy VAT. This means that they impose a second tax upon the first tax. This brings the current tax to 74%, meaning that the government takes £3 out of every £4 that customers spend on whisky.

Intriguingly, there seems to be a kind of Laffer Curve that prevents revenues from whisky rising when the “spirit level” of tax increases. Revenues from it have dropped with budget increases. A 2% cut in spirits tax in 2015 produced a 4% rise in revenue, whereas it dropped more than 7% in the first quarter of 2017-2018 when taxes on it were increased, reversing a 7% increase in 2016 when the duty was frozen. Sales went down by a million bottles when the last increase was imposed. HM Revenue and Customs figures show that spirits duty receipts increased by £228 million to almost £3.77 billion between February 2018 and February 2019 - a 6.4% on the same period in 2017. This was after the tax was not increased.

The Scotch Whisky Association now has good empirical data to back up their case that more competitive tax rates, compared to other alcohol taxes, would boost Treasury revenues. When the tax is raised, people consume less, and the tax take declines. When the tax is frozen or reduced in real terms, sales go up and revenue increases. Obviously the nannies at Public Health England will not like where that leads, but the message that stands out is plain. If the Treasury wants more to spend on public services, they should cut the tax on whisky. On International Whisk(e)y Day we can all drink to that. Cheers!