UK mulls wholesaler licensing to curb illicit alcohol trade

The UK tax office has launched a consultation on proposals to start a registration scheme for alcohol wholesalers to help crack down on illicit and counterfeit sales.

The plan by HM Revenue & Customs (HMRC) would introduce a central register for wholesalers and importers, accessible via a publicly-available online database, which make it easier to check if a wholesaler is operating illegally.

An alcohol wholesaler would be required to demonstrate they are ‘fit and proper’ to trade and their supply chains would be tested to ensure they are legitimate, says the proposal, which also envisages tougher penalties for individuals and organisations found to be acting illegally.

The HMRC also wants wholesalers and retailers to carry out due diligence on suppliers, with failure to do leaving them open to financial penalties.

All told, alcohol duty fraud is estimated to cost UK taxpayers £1.2bn ($1.9bn) a year and the profit from the trade in illicit products drives other criminal activity such as drugs, weapons and human trafficking.

The most prevalent form of alcohol fraud involves the smuggling or diversion of alcoholic drinks to bypass duties, but there are increasing reports of widespread penetration of the supply chain by counterfeit products that can pose serious public health risks.

"The organised criminal gangs behind this fraud undercut honest businesses at all levels who are trying to compete on an uneven playing field, says the HMRC. "It also undermines consumer confidence in the products they buy."

The document is open for comment until 28 October.

The British Beer and Pub Association (BBPA) published its own 10-point guide to combating fraud last year, arguing against the introduction of tax stamps for alcoholic drinks and for a series of measures designed to help HMRC track illicit shipments.

Tax stamps or some other form of marking scheme would be a "totally disproportionate response" to the problem and "ultimately would not stop fraud", according to the trade body.

It did however commit to investigating "cost-effective technologies" and voluntary UK-specific labelling that might enhance tracking capabilities.