THE SCOTCH whisky industry says 5% cut in duty will help ease a £7.5m a week hit caused by "punitive tariffs" and actually provide a £250m a year boost to the nation's tax revenues because it will boost demand.

The Scottish Whisky Association says a cut in the "significant tax burden" on Scotch whisky, which currently sees £3 in every £4 spent on the average-priced bottle of Scotch Whisky go directly to HM Treasury in taxes, would actually drive government revenues.

It comes as the industry warned that "punitive tariffs" imposed by the United States has cost the industry £450m over the last 15 months.

The industry stressed to the Chancellor that there was a need to support the industry as losses continue to rise.

It would also boost the hospitality industry - which has been one of the worst impacted by Covid-19 – and "lift the nation’s spirits" after a challenging year for industry and consumers.

The figures, based on modelling conducted by the Centre for Economic and Business Research (Cebr), show that HM Treasury can generate an additional £748m in duty and VAT over a three year period by cutting excise duty on spirits by 5%.

The study found that because spirits are very price sensitive, if the duty comes down then it generates more consumer demand and increases government revenue through tax.

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Karen Betts, chief executive of the Scotch Whisky Association, said: "The last year has been very challenging for the Scotch Whisky industry, with the combined impact of Covid-19 and US tariffs. Scotch Whisky producers, large and small, are facing considerable losses and, as a result, we are urging the Chancellor to cut spirits duty in the Budget.

“A cut in duty will also help the hospitality sector, with pubs, bars and restaurants across the UK crying out for continued support.

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“The industry is not going cap in hand to the Chancellor – but in order that we can be a partner in recovery the Chancellor must use the tax system to help grow the economy. A cut in spirits duty will deliver additional revenue for the government as well as supporting our industry as we absorb millions of pounds of losses as a result of UK government subsidies to aerospace, which sparked the trade dispute that has seen 25% tariffs on exports of Scotch Whisky to the United States.

“With £450 million in losses to date, and counting, jobs and businesses are now at risk, in Scotland and throughout our UK supply chain. The industry needs a package of support from the UK government while distillers continue to face crippling tariffs, and the Chancellor can start by cutting duty in the budget."

The impact of US tariffs on the industry has added to pressure on the Chancellor to go further than the freeze on duty he announced in the last UK budget.

READ MORE: Whisky chief slams lack of action to end US tariffs

And the SWA says the industry was "paying the price" of a trade dispute between US and European aircraft manufacturers, creating real pressure on jobs and businesses and "has compounded the losses the industry has also faced because of the global pandemic".

It is thought that the International Trade Secretary Liz Truss is going to lobby President Elect Joe Biden to drop punitive tariffs on Scotch whisky.

The International Trade Secretary had hoped to strike a last-minute deal with President Trump’s outgoing administration to remove the billions of pounds levied by Washington in 2019 on British products such as whisky, salmon and cashmere in a row with the EU.

In a long-running dispute, the US imposed the tariffs on the EU in retaliation for support given to Airbus, the European aerospace corporation. The EU responded with tariffs on £3 billion of US goods over subsidies given to American-based plane-maker Boeing. The UK suspended the tariffs from January 1.

The Scotch Whisky Association says that exports to the US have fallen by more than 30 per cent in the past year, hitting brands such as Bell’s.