Beware dodgy van sellers – sugar levy to create black market for soft drinks

Illicit white van sellers may take advantage of the sugar tax to peddle illegal soft drinks to unsuspecting shopkeepers.

Before the sugar levy, 5% of soft drinks in the UK came from untraceable sources, also known as grey stock, but the Federation of Wholesale Distributors (FWD) and the British Soft Drinks Association (BSDA)told Retail Express this could rise.

Despite the tax on a large size soft drinks container being the same as the duty on many beer cans, HMRC’s assessments show no funding was made available to enforce the new legislation.

FWD CEO James Bielby said: “Retailers may receive visits from white vans again offering prices below what can be offered by a legitimate wholesaler.”

BSDA director general Gavin Partington said: “It is important that the Government acknowledges the size of the potential side effects of this tax legislation and looks to take action to protect legitimate businesses.”

Bielby added that the opportunity for tax evasion on soft drinks created a new market for criminals forced out of other areas of tax fraud. “There’s been an issue historically with duty evaded alcohol on sale in the retail sector but to a large extent that has been cleaned up by the Alcohol Wholesaler Registration Scheme. This new tax gives fraudsters an opportunity to move into another commodity.”

Retailers respond

Aniz Gulamhussein – Nisco News Food & Wine, Liversedge, West Yorkshire

“I’ve not seen or heard anything about illicit soft drink sales yet, but we’ve definitely heard about illicit alcohol sales, it’s why we never buy anything at the doorstep. It’s a policy that protects the business from criminal sellers and it is so successful we now don’t even get approached any more, they know to stay away from our shop as we don’t put up with it. I think it will be hard to measure the sugar tax at first, as the category fluctuates heavily depending on other factors like the weather, so it is likely that it will be equally hard to judge how much illicit is passing through the market as well.”

Mehmet Guzel – Simply Fresh Bethnal Green, London

I don’t know what the scale of sugar tax avoidance is likely to be, it really depends on how it is sold and the routes to market. With a previous store a long time ago I’ve been to warehouses that sold European soft drinks imported into the UK because it was completely legal at the time. When bought in volume it offered significant savings, so I can see how with the sugar levy added ontop, it widens the price gap between legitimate and illegitimate stock, so there is a potential for fraud there.

Paul Mather – Sherston Post Office Stores, Wiltshire

The scale of illicit soft drinks will depend just as much on how retailers react as to how organised illicit sellers are. If I get offered any stock that doesn’t have a clear origin I show them the door. The big factors like with illicit alcohol and tobacco will be the potential profit incentive and what existing illicit activity the area has. When you compare the potential margin for illicit cans of coke compared to illicit alcohol or tobacco, they are much smaller, which means illicit sellers would need serious volumes to make it as profitable, and I don’t see that happening.

Read more: How retailers plan on reacting to the soft drinks levy