THE Scotch whisky industry is bracing itself for a raft of tax hikes in India after Alistair Darling's decision to raise UK duty in this year's Budget.
Industry sources say the Chancellor's "bad example" has given the green light to India's state governments to impose punitive import tax regimes.
The state of Maharashtra, which governs India's biggest city, Mumbai, introduced a 200% tax on import
ed Scotch last July in an effort to protect local whisky producers.
The tax was downgraded at the end of last year under pressure from the Scotch Whisky Association and producers such as Diageo, but senior industry executives say a "second state" is now poised to introduce a similar system following the Chancellor's decision. The move will be a significant blow to the industry, which regards India as its "top international trade priority".
The news comes just as Gavin Hewitt, chief executive of the Scotch Whisky Association, prepares to fly to Thailand this weekend in an attempt to persuade the Thai government to improve its regulation of the whisky market.
At a seminar in Gleneagles last week, Brian Donaghey, head of Diageo in Scotland, warned that other countries are likely to take a lead from Darling on how to tax Scotch. He said: "We're obviously disappointed to say the least."
The SWA is examining whether or not Maharashtra's revised import tax, which varies according to the value of the product, is compliant with World Trade Organisation rules. It is understood the association could refer the case to the European Union in the next couple of weeks.
David Williamson, government and consumer affairs manager at the association, said there were "clearly issues".
Hewitt, travelling to Thailand as part of a UK Government delegation led by trade promotion minister Digby Jones,
will urge Thai officials to impose a compulsory whisky standard to differentiate between genuine Scotch whisky and locally produced liquors which are marketed using Scottish imagery.
Williamson said: "The key problem with the current whisky standard in Thailand is that it is voluntary rather than compulsory. To protect producers of genuine whisky from unfair competition, the SWA believes it should be made mandatory."
The association has applied to the Thai intellectual property office for "Scotch whisky" to be registered and protected.
Thailand is the industry's fourth biggest market by volume and 3.2 million cases of Scotch were exported there in 2006, generating £42m.
The full article contains 410 words and appears in Scotland On Sunday newspaper.
