Speaking to a meeting of the Society of Food Hygiene & Technology recently, David Richardson explained that Dover was a very easy place for smugglers to operate from, “because only a fraction of 1% of vehicles are ever stopped coming through”.
“The product – mainly beer, but sometimes wine and to a lesser extent spirits – will just then disappear into white vans and less reputable outlets,” he added.
Diversion smuggled alcohol refers to products made in the UK, taken duty free to the continent – where it is released from bonded storage in countries where the excise duty is very low – and then illegally re-imported to the UK.
The problem was not just with the odd vanload of illegal beer coming in, but often foreign-registered vehicles, claimed Richardson.
“This is full lorry loads, this is full 40ft containers and this is 20 or 30 a time coming in,” he said. “The other thing you have to remember is Dover is a RoRo [roll-on, roll-off] port and there is nowhere to put vehicles to inspect them there physically isn’t the space.”
In fiscal terms, excise duty and excise duty fraud are “frankly insignificant”, Richardson noted. But the reason Her Majesty’s Revenue and Customs (HMRC) focused so much attention on it, and particularly the wholesale part of the market, were first its links to organised crime and, secondly, the risk to public health from consumption of illicit alcohol, he added.
Richardson estimated there were about 35 organised crime groups in the UK and although not all were involved in alcohol fraud, more would move into this area given the opportunity.
Booze fraud is very damaging to the alcoholic drinks sector and work is increasingly focusing on the sharing intelligence between regulators, the police and drinks companies and bodies such as the WSTA to stamp it out, he said. At the same time more auditing and due diligence within the wholesale sector was needed, he added.
Alcohol excise duty accounts for just 2% (£10bn) of the total £500bn annual tax collection by HMRC and it estimates its “losses” range between £500M to £2.5bn, with a mid-point figure of some £1.3bn, said Richardson. “HMRC doesn’t know whether all of that tax gap is fraud,” he added. “Some of it is going to be error or miscategorisation or miscalculation.”
Richardson said that counterfeit alcohol represented another profitable source of income for criminals. “Counterfeiting does go on and it happens with spirits and the most popular one is vodka because vodka is pretty easy to make,” he said.
A number of popular wine brands were also the target of counterfeiters, Richardson added.