Scotch whisky industry condemns UK budget tax rise

By Ian MacKenzie

EDINBURGH, March 12 (Reuters) - The Scottish whisky industry described the budget tax rise on spirits sold in the UK as "punitive" and told the government it was a blow to international competitiveness at a time of rising exports.

Gavin Hewitt, chief executive of the Scotch Whisky Association (SWA) said in a statement following British finance minister Alistair Darling's budget speech that Scottish distillers were astonished by the tax announcement.

"The government's own figures show that any duty increase on whisky is likely to reduce revenue at a time when public finances are tight," Hewitt said on Wednesday.

"A tax rise is a blow to international competitiveness when the industry has been investing significantly to meet a global demand for scotch whisky. It sets a damaging precedent that export markets may follow," he added.

In his first budget, Darling told parliament that alcohol duty will rise by 6 percent above the inflation rate with beer up 4 pence a pint, wine 14p a bottle and spirits 55p a bottle. He added alcohol duties would increase by 2 percent above the rate of inflation in each of the next four years.

The sale of scotch has soared over the past couple of years on demand from areas such as China, India, Russia and parts of South America, and the industry has reacted with multi-million pound investments in new distilleries. Some 90 percent of scotch whisky is exported.

The SWA said that while the tax level announced applied to sales in the UK, it sent "a damaging message overseas". It said foreign countries defending their own high duties on scotch whisky would look to the UK tax structure.

It said whisky exports contributed 2.5 billion pounds to the balance of trade in 2006, which it said represented nearly 25 percent of UK and 67 percent of Scottish food and drink exports. It added that 65,000 jobs depended on the industry.

The SWA said the 55p duty rise - the biggest since 1991 - would push the tax burden on a bottle towards 75 percent. To see all Reuters stories on the budget, click on [GB/BUDGET] For more Budget stories please click on [nUKBUDGET] orhttp:/ /uk.reuters.com/news/globalcoverage/budget2008

(Editing by Erica Billingham)