Tax

[rjkh]

Can anyone tell me how and when tax and excise duty are paid on items such as cigarettes or petrol.

I have always assumed that this is paid before retail sale, but to be honest it is something I know nothing about.

[Harley]

It's paid by the manufacturer. Hence you see "Duty paid" on certain items. Cigarettes destined for export are shipped duty free and the manufacturers have to keep meticulate records. All a bit silly really as they are then smuggled back and sold by criminals! Item from the National Crime Intelligence Service follows..

The smuggling of cigarettes and hand-rolled tobacco is a worldwide problem. Responsibility for tackling tobacco smuggling in the UK is assigned to HM Customs and Excise, which assesses that cigarette smuggling in 2001-2002 was responsible for �2.7 billion in lost revenue from tax and duty, while a further �580 million was lost as a result of smuggled hand-rolled tobacco. Meanwhile, it is assessed that more than one in five cigarettes smoked in the UK has been smuggled

[Buenchico]

Just to follow up Harley's very good answer:

Where duty is payable on any item, it's paid by the manufacturer (or, where appropriate, the importer). VAT then gets added on, in the usual way, as the product passes from manufacturer to wholesaler to retailer to ultimate purchaser. This way round of doing things means that we're paying tax on the duty as well as the product!

The duty system leads to some rather strange things happening. The Hope Brewery in Sheffield used to manufacture non-alcoholic lager. This was actually achieved by brewing a regular lager (Carling Black Label), and then distilling the alcohol out of it, before bottling the product. The problem was that duty became payable as soon as the Black Label lager was produced even though the final product wouldn't be subject to duty! The only way they could get round the problem was by keeping careful records of the volumes produced and then storing all of the alcohol, which had been distilled out of the lager, until the next visit of the man from Customs & Excise. The customs officer would then be invited to test the alcohol - no, not by drinking it! - before being required to witness the brewery staff pouring it into the drains. Everyone reckoned that there must have been some very happy rats in the sewers around Hillsborough! :-)

Chris

[rjkh]

Thanks for the answers guys.

One thing which slightly puzzles me though. In the example given by Chris, why would the government want to see all that alcohol poured away. Would it not make more sense to keep accurate records of what is traded to wholesale and charge on that? Why should the manufacturers methods of production be an issue?

Or is there a belief that any excess alcohol product would then be traded "under the counter"?

And then could the brewery not simply produce a higher ABV lager, take the alcoholic distillation from that and not inform the authorities of what their original product was?

I really don't know much about the workings of an average brewery so can't really say if this would be feasible.