One tenth of all beer sales in the UK are illicit, according to HM Revenue & Customs.
The department has released a mid-point estimate for the amount of revenue lost to duty fraud in 2009-10.
It now believes beer duty fraud cost the country £500 million in the period, £300 million lower than its upper estimate of £800 million.
That means that overall, some £900 million were lost to duty evasion on beer and spirits in 2009-10, compared to earlier estimates of £1.2 billion.
The mid-point estimate still saw duty fraud increase exponentially, from £400 million or 8% of the market in 2008-9.
The Federation of Wholesale Distributors said even the lowest estimates showed the “massive scale” of beer duty fraud, and called for tough action to stamp it out – including duty stamps on beer.
Chief executive James Bielby said: “Our members believe that the government must act to stamp out this illegal supply chain for cheap alcohol and ensure that alcohol products are distributed by legitimate, duty-collecting wholesalers.
“They also believe that further rises in alcohol duty are simply pouring water into a leaking bucket and that preventative measures such as the introduction of duty stamps on beer bottles and cans will turn off the tap for duty fraudsters, while protecting retailers from accidentally buying illegal stock.”
The British Beer & Pub Association said the government is still overestimating the tax gap, and that £500 million is “far too high”.
Chief executive Brigid Simmons said: “The widening range that they present in their figures makes me concerned that they haven’t yet got a full understanding of this issue, and taken on board the concerns we have highlighted with their current methodologies. Also, HMRC assumes no VAT is paid on any of this beer, which will not always be the case if it is largely sold through retail outlets as, they maintain.
“The government now needs to wipe the slate clean when it comes to looking at solutions – it is not right to use weak data on duty fraud to justify hugely costly and damaging proposals, such as special stamps on every can and bottle of beer. Spirits and beer cannot be treated the same – in terms of duty, a single bottle of spirits equates to 20 cans of beer, which comes in a vast range of products and package types. We are also opposed to supply chain legislation on breweries, which could also be very costly.
“HMRC already has powers available to tackle fraud, and brewers have themselves put a lot of effort into providing detailed data on beer movements, and invested in due diligence procedures to reduce the risk of fraud. It is this, along with robust and targeted enforcement that will deliver results.
“But we also need to remember a key driver of this tax gap – the eye-watering rates of beer duty in Britain, relative to our neighbours. Britain levies 40% of the entire EU beer duty bill, and over five times more beer tax in total, than the biggest beer market, Germany. It would be totally unfair if a problem driven by punitive rates of tax resulted in more huge costs being heaped onto British brewers.”