Budget 2017: The retail reaction
11 October 2016
The price of a packet of cigarettes will rise by 50 cents from tonight onwards, while the tax on alcohol and fuel will remain unchanged and a sugar tax is to be introduced in April 2018.
These are some of the main Budgetary measures to affect retailers and the verdicts from a number of retail groups are in.
ABFI: Budget a missed opportunity to reduce excise
The Alcohol and Beverage Federation of Ireland (ABFI) has said the government’s decision today not to reduce excise on alcohol in next year’s Budget is a missed opportunity for one Ireland’s largest indigenous sectors.
Commenting on Budget 2017, Ross Mac Mathuna, director of ABFI said; The drinks industry has come under increasing pressure this year following the Brexit vote and subsequent plunge in the value of sterling.”
He pointed out that Ireland continues “to pay the highest price for alcohol in the EU – on a standard €9 bottle we pay a staggering €3.19 in taxes, meaning it is 12% more expensive than the equivalent in the UK. This is putting jobs at risk and we are increasingly vulnerable to cross border trading.”
He described excise as “a tax on jobs, consumers and tourism and needs to be reduced”.
NOffLA: Acknowledges decision not to increase alcohol excise
The National Off-Licence Association (NOffLA) today acknowledged the government’s decision to not increase excise duty on alcohol in Budget 2017. The association said the move will offer some relief to the difficulties currently being faced by the independent off-licence industry in Ireland.
Evelyn Jones, government affairs director, NOffLA, said the move “provides a level of stability for business owners all over the country”.
However she pointed out that off-licence businesses still face difficulties, stating: “Since 2008 some 3,000 jobs – 34 per cent of the sector – have been lost, and 554 off-licences have closed. In April of this year seven off-licences alone closed.” She also said the fact that Irish consumers still have to face the highest rate of excise in the EU, make Ireland “an unattractive place” to do business.
NOffLA is again calling on the government to act on its commitment to the health of Irish people all across the country by restoring the ban on below invoice cost selling of alcohol. The association says this would save the exchequer €24 million per annum through recouped VAT and would safeguard communities across Ireland.
IBC: “Extremely disappointed” by sugar tax
Kevin McPartlan, director of Irish Beverage Council said: “”We are extremely disappointed that the Minister for Finance continues to labour under the delusion that additional taxes on soft drinks will have any positive impact on obesity. Internationally, this thesis has been tested and has a 100% failure rate. A sugar tax will hit consumers, industry and the economy for no public health benefit.
“It is some comfort that the Minister has announced that the levy will not be introduced ahead of that planned in the UK. We can only hope government will engage in meaningful dialogue to minimise the economic loss to industry and threat to Irish jobs.
“Tackling obesity requires a whole of society approach. We remain committed to playing our part in tackling obesity and will continue with initiatives like reformulation, which took 2,500 tonnes of sugar and 10 billion calories from the Irish diet in a seven year period.”
ITIC: Welcomes retention of tourism VAT at 9%
The Irish Tourist Industry Confederation (ITIC) today welcomed Budget 2017. In particular the organisation said retention of the VAT rate for tourism services at 9% allows Ireland to remain competitive in this key period of post-Brexit uncertainty.
Chairman of ITIC Paul Gallagher said “17 of the 19 euro-zone countries have tourism VAT rates of 10% or less so the tourism VAT rate in Ireland is right-sized and competitive at the moment.”
ITIC added tourism is performing strongly at the moment and is Ireland’s leading indigenous sectoral employer. Decisions taken in Budget 2017 are vital especially for a sector that is likely to be challenged by Brexit.
Already since Brexit the sterling/euro exchange rate has weakened by 15% making holidays to Ireland more expensive for British tourists, who account for 40% of all international visitors to Ireland.
The Irish tourism industry is set to be worth over €7.5 billion to the economy this year with close to 9 million international tourists coming to our shores. ITIC though is keen to stress that tourism cannot be taken for granted.
The organisation feels that the government policy for tourism – ‘People, Policy & Place; Growing Tourism to 2025’ – which sets a target of €5 billion annual spend from 10 million overseas tourists by 2025 is not ambitious enough. Given current performance, this would mean an average annual growth rate of less than 2% to reach the revenue target.
RAI: Supports retention of 9% tourism tax
The Restaurants Association of Ireland (RAI) has expressed a cautious welcome today following the announcement of Budget 2017. The statement comes after Budget 2017 revealed the Government will retain the 9% VAT rate for the tourism and hospitality sectorand will not be increasing excise duty on wine. The association has also voiced its frustration that employers’ PRSI bands will not be widened.
The association added that the success of the lower rate of VAT is evident in the 41,200 new jobs that have been created since its introduction in 2011.
Retail Ireland: “Welcome initiatives, but also a missed opportunity”
Retail Ireland, the Ibec group that represents the retail sector, welcomed elements of Budget 2017 that will increase disposable income and support consumer spending, but said more could have been done to support retailers under pressures from a high cost base and acute currency pressures. According to the group, the new Town Centre Regeneration Fund is timely and very welcome, but the failure to tackle business costs and deliver e-commerce supports was a lost opportunity.
Retail Ireland also expressed disappointment at the move to further increase the National Minimum Wage following a 50 cent (6%) increase in January of this year. Retail Ireland director Thomas Burke said it was disappointing that that the government had not introduced “measures to offset the increase in associated employment costs such as reducing employers PRSI to its previous 4.25% level”.
Retail Ireland finally expressed disappointment at the government’s decision not to introduce measures to incentivise the migration of Irish retailers into the e-commerce channel, through a proposed tax credit which would have helped Irish retailers and the Exchequer take a greater share of the increasing volume of online retail trade. Thomas Burke pointed out that 70% of trade currently leaves Ireland, going to foreign-based websites.
RGDATA: Welcomes 0.5% USC reduction, town centre revitalisation and 800 new gardaí – intends to make submission on sugar tax public consultation
Taxes and income
RGDATA director general Tara Buckley said the association “welcomes the measures in Budget 2017 that put more money in people’s pockets. We urge people to spend this on Irish goods in a locally owned Irish shop where possible – this is worth four times more to your local community and will help retain the 90,000 jobs in the independent retail sector.”
Town centre revitalisation
RGDATA had specifically sought measures in the budget to support town centre revitalisation and policies to get more people back living in town centres.
Tara Buckley said the organisation “welcomes the additional investment in Rural Regeneration and will be seeking a small portion of this to be spent on Town Centre Health Checks, developing Town Plans and the development of National Town Centre Management strategic support services. RGDATA will be impressing on the various Ministers involved that a strategic plan led approach, not one off projects, will mean we get more bang for our buck and genuine town and village renewal.
“RGDATA also welcomes the investment in the extension of high speed Broadband across the country,” Buckley added.
Recruitment of 800 new gardai
RGDATA also welcomed the increase in garda numbers, stating that we urgently need more visible presence of garda on our streets to combat crime.
RGDATA noted there will be a public consultation on the introduction of a tax on sugar sweetened drinks and plans to consult with its members and make a submission.
FDII: Sharply criticises tax on sugar-sweetened drinks and although Budget begins to address Brexit challenge in agri-food, says more needs to be done
Food and Drink Industry Ireland (FDII), the Ibec group that represents the food and drink sector, said measures in the budget including tax reform and increases to the budgets of state agencies are a start in addressing the Brexit challenge, but do not go far enough. More targeted action is needed this year.
FDII Director Paul Kelly proposed “remedial measures of sufficient scale and ambition” to address Brexit difficulties for exporters. In particular:
· A €25 million fund to support companies maintain their export business in the UK as well as diversifying into new markets
· The reintroduction of the Employment Subsidy Scheme and the Enterprise Stabilisation measures last applied in 2009-2011.
FDII sharply criticised proposals to introduce a tax on sugar sweetened drinks, saying it “will cost the Irish consumer dearly with no evident benefits and it is the thin end of the wedge for further damaging discriminatory taxes on the Irish food and drink sector.”
Ibec: Positive direction, but Brexit strain demands further action
Ibec, the group that represents Irish business, said Budget 2017 contained a range of positive measures that will support economic growth, but warned that the scale of the Brexit challenge will demand a series of additional reforms and initiatives this year. The attractiveness of Ireland as a place to live and work is a massive concern of business. Moves to increase education spending, boost the housing supply and make childcare more affordable are welcome.
Ibec CEO Danny McCoy said: “As Brexit risks crystalise, it is clear the budget does not go far enough…A more substantial currency crisis package is needed within 60 days. An urgent, cross-departmental response, coordinated by the Taoiseach, must involve the re-prioritisation of current resources and new spending.”
“Changes to the taxation of entrepreneurs are welcome, if modest,” McCoy added. “The capital gains tax reforms and changes to the personal tax regime for the self-employed are sensible and send out the right message about the need to better support entrepreneurship.”
On investment, Ibec welcomed some additional capital spending, but reiterated that EU fiscal constraints meant that the resources allocated fall far short of what is needed.