We got a word from a beer tax scandal in the UK. This scandal revolves around Carling lager. One of if not the largest light lager names in the UK. For years Carling has advertised to pubs and the public in general that their beer is 4% alcohol by volume. In the UK beer is taxed based on how much alcohol is in the beer.
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Beer taxation system in the UK
Any beer that is between 2.8 and 7.5% gets taxed 19.08 pence per alcohol percentage per litre. So to break that down a 5% beer would be taxed the 19.08 pence times 5 of 95.4 pence per litre. And that works out to just over 54 pence per pint of a 5% beer. The less alcohol in a beer the less tax you have to pay.
Carling advertised their beer as 4% alcohol by volume for years. When auditors noticed Carling was paying the tax rate for a 3.7% beer they raised questions. When you sell millions of litres of beer in the UK each year any small variance in the tax calculation can mean millions of pounds in taxes.
When the UK government sanctioned Miller Coors the parent company that owns Carling with a 50 million pound unpaid tax bill the mega brewer was quick to respond. Perhaps not in the way we might expect.
The mega brewers response
Instead of disputing the claim that they hand underpaid their taxes. They have admitted that they had changed their beer to 3.7% but continued to advertise their beers being 4%. Miller Coors response revealed a pretty devious plot.
First, they were going to take advantage of the beer tax loophole that allows brewers and other distillers to vary the alcohol content by up to 1/2 of 1% versus what they advertise. This flexibility in the law allows brewers with less consistent processes to not be liable for extra tax in case something goes wrong and their beer is just a little too alcoholic. It was never intended for a huge industrial brewer with extremely consistent brewing techniques.
Second, since they knew they didn’t legally owe any more on taxes they decided not to advertise their beer was weaker. Because if they had admitted their beer was weaker distributors and pubs would have had asked for a lower price for beer. So since it was legal to pay fewer taxes by making their beer weaker and legal for them to advertise it as slightly stronger than it actually was. They were able to avoid having their distributors ask for lower prices. Carling didn’t actually break a law in this case.