The report, released today (January 25) said HMRC’s renewed strategy, which now covers wine and beer as well as spirits, is a “significant improvement” on its previous strategy.
But it said there has been “no tangible success” in its work with the drinks industry to prevent diversion fraud, which sees stock which has been legally moved to other EU countries without excise duty paid being diverted back into the UK market.
“HMRC has made minimal progress working with industry to secure alcohol supply chains,” the report said.
The department estimated that the amount lost to duty fraud in 2009-10 could be as much as £1.2 billion, up 41% on £850 million the year before.
But in September HMRC told OLN £1.2 billion had been lost in beer and spirits duty alone, not including wine.
The report also noted that in each of the four years to 2009-10 there were convictions in six cases or fewer for suspected alcohol duty fraud.
In July OLN reported that fewer than 60 people had been prosecuted for duty fraud in the past three years.
But HMRC said civil sanctions can be more effective in some cases, and noted that alcohol seizures had increased by 61% to nearly 10 million litres in 2010-11.
National Audit Office head Amyas Morse said: “HMRC has estimated that the evasion of alcohol duty could have cost the taxpayer over £1 billion in 2009-10 – and the level of fraud is on the rise.
“While the renewed strategy to deal with this is more comprehensive than what went before, and the department has had some early notable successes, it needs to do better in a number of areas. This includes establishing reliable estimates of the tax gaps for beer and wine and achieving tangible success in tackling the illicit diversion of duty unpaid alcohol back into the UK market.”