The cost of booze tax fraud

The cost of booze tax  fraud

The Offie in Beaconsfield Road, where the owner has to sell at lower prices due to competition

Fake wine seized in Brighton in February

First published in News by

“IF you see cheap alcohol for sale and it looks too good to be true, then it probably is.”

That is the warning from Revenue and Customs officers as they grapple with smuggling rackets which cost the country up to £1.2 billion a year.

But despite high-profile operations in Brighton and Hove and elsewhere the authorities appear powerless to stamp it out.

Price is said to be a telltale sign of possible duty evasion.

The duty on a 75cl bottle of normal-strength wine in the UK is £1.90.

On top of that comes VAT at 20% – meaning that for every bottle of wine we buy, we only start paying for the wine itself, its production, transportation and marketing after the first £2.28.

Customs officers say this means that cut-price drinks offers simply could not generate sufficient income for the sellers if the full tax was being paid.

Trading standards officers have long warned that “two for one” offers on bottles of wine – effectively selling them for half the marked price – could indicate duty has been evaded.

And ultra-cheap offers are still around on the streets of Brighton and Hove.

Two for £5 offers, and similar deals like three for £8, are available in some shops, mainly independent outlets across the city.

Keith Webb, trading director of the national off-licence chain Bargain Booze, says: “If it is being sold at £2.50 a bottle, you have to believe they have bought that bottle for 22p and they are making a profit on that as well.”

Mr Webb says the problem in Brighton and Hove is so bad that before considering opening a new shop in the city, the firm would scout the immediate area to ensure no frauds were taking place which would make it impossible to compete while paying duty.

Problem areas

He said: “Whether it be Brighton or Birmingham, most of this stuff is being conducted in plain sight.

“What we have to do is to have a really good look round at what the level of duty fraud is in that area. On the south coast, certain areas are a problem.”

Cheap deals – and the potential for duty evasion – frustrate firms who are trying to compete in the off-trade.

Shops which avoid duty can undercut competitors.

But even if they charge full market price, they still make £2.28 extra profit per bottle.

Beer and vodka have also been targeted by the fraudsters.

As such, Government increases in duty – aimed at raising revenue and reducing alcoholism – only serve to put even more money in the pockets of the gangs as prices in general rise.

Mr Webb says: “Every year they keep rolling it up, it just becomes more profitable for these people, who have such little fear of being caught.”

Health argument

He says duty fraud undermines the arguments over the health benefits of raising alcohol prices.

He says: “The despair of the legal and decent honest retailers is what we get from the MPs.

“One of the MPs was saying ‘in my constituency strong lager is cheaper than fizzy drinks’.

“Either your constituents are getting really ripped off, or they’re being sold duty fraud drink.”

Some businesses say their offers are not too good to be true – they are really selling their goods at a loss.

At The Offie in Beaconsfield Road, a sign outside proclaims “Italian wines, buy one, get one free”.

Until recently the price for two bottles was just £4.99.

Loss leaders

The chain is owned by M and O Trading, whose buyer and former director Chas Majeed said: “There are only two shops where we have to sell it at that price, and that is purely because there is competition.

“We have to have loss leaders.”

But he said publicity and action by Customs and Trading Standards mean drinkers are getting wise to how to avoid dodgy goods.

He said: “Customers are getting aware as well, not to buy off funny shops that are selling alcohol cheap.

“If shops want to buy off the back of vans, Customs have to deal with those people.

“Customs are on it day in, day out. There are a lot in Brighton. They are picking it up.”

Mr Webb agrees, saying: “Brighton is one of the few areas in the country where we have seen positive proactive action being taken by the authorities. In most areas, nothing happens.”

Lost licences

Brighton and Hove City Council’s licensing committee, and the officers who support it, can certainly not be said to have been slow to act on problems in the off-trade either.

Several off-licences lost their licences last year after they were found selling fake Jacob’s Creek wine.

In February Customs officers led two days of raids on 33 stores in Brighton and Hove.

They seized 2,950 bottles of wine and spirits, and 2,270 litres of suspected illegal beer – with 1.2 tonnes of stock seized at a single shop.

At the time, Revenue and Customs described the operation as a “significant success” and said shopkeepers selling fake goods could have their licences revoked.

But The Argus learned that not one off-licence has faced a prosecution or a licence review – where a panel of councillors decides whether to strip a shop of its licence to sell alcohol – as a result of the suspected duty evasion uncovered in the February raids.

Enforcing payment

It is Customs, not the city council, that is responsible for enforcing duty payment, and the city council, not Customs, which decides whether licences should be revoked.

Neither has offered a clear explanation of why no shop licences have so far been affected by the seizures in February.

Without commenting on the specific cases, Customs says it takes the view in some circumstances that the seizure of stock is punishment enough the first time an offender is caught, with prosecution potentially reserved for repeat offenders.

That argument has been used to explain a lack of prosecutions following past discoveries in the city.

Customs says its officers would supply their witness statements to support action by the council, but it is the council’s responsibility to bring a licence review.

Licence revoked

The city council can revoke a licence if a shop is contributing to crime and disorder – and in the past that has been said to include suspected duty fraud.

But when council officers returned to the shops raided in February later in the year, to gather their own evidence for a possible review, they found no more suspected duty-evaded stock.

The upshot is that no prosecutions or revocations have so far been brought despite what, in local terms at least, were significant hauls of suspected duty-evaded alcohol.

Councillor Ben Duncan, chairman of the Brighton and Hove City Council licensing committee, said: “This was a Customs-led action which we supported.

“Our reaction has been stringent monitoring of premises rather than licence reviews.

“However where we feel it’s in the public interest we do prosecute and we do review licences.”

The deterrents for duty evaders – even if caught – are not as strong as for other crimes.

Wholesalers loophole

The law as it stands means that that even businesspeople who have been stripped of a licence to serve the public can continue to work in the supply chain.

While off-licences, pubs and other venues face strict regulation under the Licensing Act, the wholesalers who supply them with their drink do not have to have a licence.

One Kemp Town shopkeeper, who declined to be named, said: “They are still around.

“The people who sell the cheap stuff, they sell from a van. We always ignore them.”

The warnings about low-price alcohol remain in place – as do the offers themselves in some stores and the people supplying the duty-evaded drink.

A spokeswoman for Customs said: “Alcohol fraud isn’t a harmless fiddle.

“It’s more often than not organised crime, run by gangs involved in other types of serious criminality.”

Anyone with information about illegal alcohol can call the Customs helpline on 0800 595000 or go online www.hmrc.gov.uk/reportingfraud/ online

Counterfeit goods

Several shops have lost their licences in Brighton and Hove in recent years following seizures of fake wine and spirits.

Spelling mistakes in the words “Australia” and “Sauvignon” were a giveaway on the otherwise convincing labels of counterfeit Jacob’s Creek bottles – branded Fake-ob’s Creek.

Dozens of bottles containing poor quality, fizzy liquid were found.

More dangerously, counterfeit vodka has been found to contain many times the legal amount of industrial alcohol, which in large enough amounts would be poisonous.

Counterfeit vodka was found in Admiral Petrov, Glen’s and even Smirnoff bottles in the city.

The problem has been reported elsewhere in the county, with counterfeit vodka forming part of the case for the revocation of an Allsorts shop’s licence in Worthing in September.

Since then the dangers of fake spirits have been highlighted by the death of Worthing man Adam Bohm, 49, who died after consuming vodka which was 40% methanol. He had imported the brew from Poland himself.

Fresh warnings were issued after bootleg spirits caused 20 deaths in the Czech Republic in September.

Since February only a handful of fake Jacob’s Creek and a small amount of counterfeit vodka has been found in Brighton and Hove.

An emerging problem has been a lack of English labelling on Polish and Czech lagers, which breaks food safety laws.

 

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Comments (12)

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8:56am Tue 11 Dec 12

sbiscorrupt says...

So, we have a government that argues that if you tax rich people too much, they simply avoid paying, so they reduce that tax...

But tax a product to the hilt, and then clamp down on those who try to do the same - namely avoidance?

Double standards as ever!
So, we have a government that argues that if you tax rich people too much, they simply avoid paying, so they reduce that tax... But tax a product to the hilt, and then clamp down on those who try to do the same - namely avoidance? Double standards as ever! sbiscorrupt
  • Score: 0

9:01am Tue 11 Dec 12

BURIRAM says...

If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade.
Two bottles of wine for £4.99 is still available in Queens Road just down from the station.
If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade. Two bottles of wine for £4.99 is still available in Queens Road just down from the station. BURIRAM
  • Score: 0

9:34am Tue 11 Dec 12

mustaphaLeeko says...

BURIRAM wrote:
If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade.
Two bottles of wine for £4.99 is still available in Queens Road just down from the station.
And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too.

I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume!

Good job you didn't name the store, they might have sued you.
[quote][p][bold]BURIRAM[/bold] wrote: If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade. Two bottles of wine for £4.99 is still available in Queens Road just down from the station.[/p][/quote]And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too. I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume! Good job you didn't name the store, they might have sued you. mustaphaLeeko
  • Score: 0

9:36am Tue 11 Dec 12

mustaphaLeeko says...

mustaphaLeeko wrote:
BURIRAM wrote:
If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade.
Two bottles of wine for £4.99 is still available in Queens Road just down from the station.
And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too.

I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume!

Good job you didn't name the store, they might have sued you.
sp. correction "by" not "buy" before the spelling pedants get me!
[quote][p][bold]mustaphaLeeko[/bold] wrote: [quote][p][bold]BURIRAM[/bold] wrote: If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade. Two bottles of wine for £4.99 is still available in Queens Road just down from the station.[/p][/quote]And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too. I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume! Good job you didn't name the store, they might have sued you.[/p][/quote]sp. correction "by" not "buy" before the spelling pedants get me! mustaphaLeeko
  • Score: 0

9:38am Tue 11 Dec 12

Maxwell's Ghost says...

No wonder town was punctuated with sick all over the streets early on Saturday morning with booze that cheap.
People really are getting into the Christmas spirit as it was unusually bad.
No wonder town was punctuated with sick all over the streets early on Saturday morning with booze that cheap. People really are getting into the Christmas spirit as it was unusually bad. Maxwell's Ghost
  • Score: 0

10:59am Tue 11 Dec 12

mustaphaLeeko says...

mustaphaLeeko wrote:
mustaphaLeeko wrote:
BURIRAM wrote:
If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade.
Two bottles of wine for £4.99 is still available in Queens Road just down from the station.
And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too.

I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume!

Good job you didn't name the store, they might have sued you.
sp. correction "by" not "buy" before the spelling pedants get me!
aagh another spelling mistake.. "sansiburys", lol, it was supposed to be "sainsburys".

Do I qualify for a job at The Argus now!
[quote][p][bold]mustaphaLeeko[/bold] wrote: [quote][p][bold]mustaphaLeeko[/bold] wrote: [quote][p][bold]BURIRAM[/bold] wrote: If the council is licensing those shops to sell illegal alcohol than why can't the customs take the council to court for allowing the shops to trade. Two bottles of wine for £4.99 is still available in Queens Road just down from the station.[/p][/quote]And Sansiburys are selling 3 bottles of Banrock Shiraz mataro, or 3 bottles of Blason de Bourgogne Pinot Noir for £5 amongst others, so buy your logic they are avoiding tax and selling illegal alcohol too. I think you'll find £2 for £4.99 is known in the trade as a loss leader to get people in through the door and is not a sign of illegaility as you assume! Good job you didn't name the store, they might have sued you.[/p][/quote]sp. correction "by" not "buy" before the spelling pedants get me![/p][/quote]aagh another spelling mistake.. "sansiburys", lol, it was supposed to be "sainsburys". Do I qualify for a job at The Argus now! mustaphaLeeko
  • Score: 0

11:47am Tue 11 Dec 12

leobrighton says...

That cheap wine is vile. Much better to spend a bit more for something decent and avoid getting indegestion, heartburn etc
That cheap wine is vile. Much better to spend a bit more for something decent and avoid getting indegestion, heartburn etc leobrighton
  • Score: 0

12:03pm Tue 11 Dec 12

nosolution says...

Went to Rottingdean smugglers night last week that celebrated booze smugglers from 200 years ago who supplied the masses with a little luxury that they could afford.This country has always over taxed things people enjoy and as long as they still do people will always buy it cheaper.France for example has always looked after their working population by letting them have a little merryment in their lives without asking them for too much in taxation...
Went to Rottingdean smugglers night last week that celebrated booze smugglers from 200 years ago who supplied the masses with a little luxury that they could afford.This country has always over taxed things people enjoy and as long as they still do people will always buy it cheaper.France for example has always looked after their working population by letting them have a little merryment in their lives without asking them for too much in taxation... nosolution
  • Score: 0

12:16pm Tue 11 Dec 12

bug eye says...

far too many offies that are encouraging binge drinking and preloading and ruining the look of the city and the economy of our legitimate hardworking pubs. zero tolerance is the only way these offies that have been caught should have lost their licence even if it was a first offence to send out the message, as it is others see no deterrent. lives are at risk and so is the economy and this weak council are ruining this once great city shame on them. cheap booze and drugs are not a right or essential.
far too many offies that are encouraging binge drinking and preloading and ruining the look of the city and the economy of our legitimate hardworking pubs. zero tolerance is the only way these offies that have been caught should have lost their licence even if it was a first offence to send out the message, as it is others see no deterrent. lives are at risk and so is the economy and this weak council are ruining this once great city shame on them. cheap booze and drugs are not a right or essential. bug eye
  • Score: 0

1:09pm Tue 11 Dec 12

MuammarQaddafi says...

Having been in America lately, prices there are a reality check. It varies from state to state, but in many places the very same imported bottle of spirits or wine costs twice what it does in Britain, and that's with British duty and VAT figured in. That makes me less upset with our prices.
Having been in America lately, prices there are a reality check. It varies from state to state, but in many places the very same imported bottle of spirits or wine costs twice what it does in Britain, and that's with British duty and VAT figured in. That makes me less upset with our prices. MuammarQaddafi
  • Score: 0

4:35pm Tue 11 Dec 12

sbiscorrupt says...

MuammarQaddafi wrote:
Having been in America lately, prices there are a reality check. It varies from state to state, but in many places the very same imported bottle of spirits or wine costs twice what it does in Britain, and that's with British duty and VAT figured in. That makes me less upset with our prices.
But have you crossed the channel?
[quote][p][bold]MuammarQaddafi[/bold] wrote: Having been in America lately, prices there are a reality check. It varies from state to state, but in many places the very same imported bottle of spirits or wine costs twice what it does in Britain, and that's with British duty and VAT figured in. That makes me less upset with our prices.[/p][/quote]But have you crossed the channel? sbiscorrupt
  • Score: 0

5:25pm Tue 11 Dec 12

John Steed says...

the clue in the report that you are all missing is NORMAL STRENGTH what ever that is, in reality lidl sell wine as low as 4% alchohol with a lot of cheap plonk being just 8% long way short of a decent bottle of red/white at 12-13% the revenue is based on alcoholic strength, VAT is just a sales tax on top.
A huge amount of booze comes from ethnic sources rather than traditional importers, loads of east european beer, very tasty I might add bypasses the usual channels. likewise container loads of wine, the reality is its up to HMC&R to catch the cheats, and for the cheats its well worth the risk, meanwhile due to licensing policy councils are helpless in doing anything,or is that useless!
the clue in the report that you are all missing is NORMAL STRENGTH what ever that is, in reality lidl sell wine as low as 4% alchohol with a lot of cheap plonk being just 8% long way short of a decent bottle of red/white at 12-13% the revenue is based on alcoholic strength, VAT is just a sales tax on top. A huge amount of booze comes from ethnic sources rather than traditional importers, loads of east european beer, very tasty I might add bypasses the usual channels. likewise container loads of wine, the reality is its up to HMC&R to catch the cheats, and for the cheats its well worth the risk, meanwhile due to licensing policy councils are helpless in doing anything,or is that useless! John Steed
  • Score: 0

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