Industry expresses huge disappointment at Budget tax hike

Budget 2014 increased excise by 10 cent on beer & spirits and by 50 cent on a bottle of wine.
Budget 2014 increased excise by 10 cent on beer & spirits and by 50 cent on a bottle of wine.

Reaction to the 10 cent excise hike in beer and spirits and the 50 cent increase in excise on wine has been predictable. Drinks Industry Ireland reviewed the reaction across the drinks industry.



16 October 2013

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Drinks Industry Group of Ireland
The Drinks Industry Group of Ireland expressed extreme disappointment at the excise increase and has stated that it will have a negative impact on jobs in the sector.
“The decision to increase indirect taxes through huge excise increases is short-sighted and will damage employment in the drinks and hospitality sectors,” commented DIGI Chairman Peter O’Brien, “The penal excise increases announced today, on top of those introduced last year, will  increase the burden on pubs, bars, restaurants, hotels, and independent off-licences and will put more jobs, businesses and livelihoods at risk. “This directly contradicts the Minister’s stated aim to support job creation and small business.
“Furthermore we predict that the Government will fail to meet its targets from these taxes as in addition to impacting negatively on consumer confidence and discouraging the Irish public and visitors to spend money in the wider hospitality sector, we’re also likely to see a rise in illegal alcohol trade and cross-border shopping.
“Government policy is to encourage domestic industry and promote exports, however today’s measures will negatively impact on Irish drinks exports whose success is built on a solid domestic base.
“Government policy is to encourage tourism however today’s measures will damage a key sector of the Irish tourism offer, driving up prices and further damaging the pub.
“Government policy is to support jobs and employment creation however today’s measures will further decimate fragile jobs in a struggling sector. Employment in the sector has fallen by 8,000 in the last five years. Between 2007 and 2012 almost 1,000 pubs have shut their doors and independent off-licence businesses are also in a very weak economic position with closures, declining sales and reducing employment.
“The indirect taxes announced by the Government today are short-sighted and will be very damaging.”

Vintners Federation of Ireland

VFI President Gerry Rafter commented, ‘‘Today’s announcement is a kick in the teeth for publicans across the country. The Minister’s decision to raise the excise by 10 cent a pint will put further pressure on an already fragile industry.
“Since 2009 over 6,000 jobs have been lost in the industry. We estimate that this measure will put a further 2,000 jobs in jeopardy in the next 12 months. Most pubs are family-run business in towns and rural parts of Ireland, often where there is little other employment. These jobs needed protection. Instead they got a wallop. Our organisation warned Minister Noonan that any changes in excise would cause havoc in the pub industry. He chose not to listen and that will result in more people on the live register and more Social Welfare Payments.’’
The further increase in excise of 10  cent on the pint will only serve to widen the disparity between the on-trade and off-trade, encouraging the misuse of cheap alcohol being sold by supermarkets that sell alcohol as a loss leader, he added while welcoming the retention of the 9% VAT rate “… but this is cold comfort to an industry that’s been further hammered by this excise hike”.
The VFI President concluded, “This attack will drive a dagger into the heart of our industry’’.

Licensed Vintners Association

Dublin publicans have strongly criticised the decision stating that the 20% increase in the excise rate would translate to a 10 cent increase on the price of a pint of beer and on a measure of spirits with an additional 50 cent excise being imposed on a bottle of wine.

LVA Chief Executive Donall O’Keefe said his members were bitterly disappointed at the increase and said it would definitely lead to pub closures and job losses.

"This increase flies in the face of the Government’s stated objective of stabilising the domestic economy and promoting jobs and growth,” he stated, “This move will have precisely the opposite effect on the pub sector. It’s the second successive Budget we’ve seen a substantial excise hike in an environment where the pub sector is under huge pressure.

“The increase means one third of the retail price of a pint of beer will go straight to the Government and it also means Ireland has one of the highest excise levels in Europe.”

According to the LVA while retail sales generally have fallen 12.5% over the last six years, the pub trade has seen a decline of 33%. In this context the Association said its members cannot understand why excise rates are being hiked again.

The Association welcomed the decision to retain the 9% VAT rate for the hospitality sector.


Irish Brewing Association

The Irish Brewers Association said it was severely disappointed at the Government’s decision. This 18% increase will not only leave people paying more in Irish pubs than in almost every other European country, it will also cost jobs in the wider agriculture sector, it stated. It means that excise on beer and cider has now increased by 43% in the last two years. Irish beer drinkers now pay the third highest and cider drinkers pay the second highest rate of taxes on their pint in the EU. Recent EU studies showed Irish alcohol prices as being the second highest in Europe.
The IBA said that today’s excise increase means that consumers are now paying an additional 25 cent in tax on each pint sold in an Irish pub, when compared with December of 2011. This is made up of an additional 5 cent in VAT on top of the two increases of 10 cent in excise announced by the Government in the last two Budgets.
Ireland’s brewing sector provides more than €870 million per annum in revenue for the State with a further €400m invested in the production, marketing, export and retail of beer.
IBA Chairman David Smith, pointed out, “The Irish brewing industry currently purchases over 170,000 tonnes of malted barley and 46,000 tonnes of apples from Irish farmers each year for use in the brewing of beer and cider. This in turn supports over 2,500 farming families all over Ireland making it one of the most important sectors within the drinks industry in terms of indigenous manufacturing.
“At a time when domestic beer and cider consumption is falling (14% in last five years), we estimate that this draconian increase in excise, will put serious pressure on the Irish beer and cider industries and their suppliers. In short it will kill jobs.”
“While Irish beer and cider products continue to perform strongly internationally, high domestic excise rates send the wrong message to important export markets.”
“Government is putting further unnecessary pressure on our sector and its suppliers at a time when it should be offering every support possible.”
National Off-Licence Association
The National Off-Licence Association also expressed its deep disappointment over the Government’s decision and has highlighted its fear for the survival of the independent off-licence sector.
“This is an extremely irresponsible decision by Government which will put independent off-licences under severe pressure, re-ignite out of State retailing and lead to another increase in illicit alcohol trading,” NOffLA Chairman Evelyn Jones said.
Prior to this Budget we already had the highest tax for wine, the second highest for cider, third highest for spirits and the fourth highest for beer. Excise on wine is now 576% above the EU average.

Excise on a 75cl bottle of wine will increase by 40 cent bringing the total excise to €3.17 or €3.90 including VAT.
Excise on a 500ml can of beer will increases by 7 cent bringing the total excise on a can of beer to 48 cent or 59 cent including VAT.

And according to the NOffLA Chairman the Government may be in breach of EU competition law due to the rates of excise on alcohol products.

“The Lisbon Treaty clearly states that no EU country can impose internal taxes on imports which would afford indirect protection to other products – this is exactly what is happening in Ireland with wine,” she stated, “The significant increases in taxation on wine have led to a situation where only industrially produced wine can be found at the lower price points. The quality of the product is being reduced because of extremely high taxes that are completely out of sync with our European neighbours. Consider a standard €8.00 bottle of wine in Ireland. Over half of this price is attributable to tax (excise and VAT) with only €0.12 of the price actually accountable to the wine itself.
“The Government is using tax as a means to reform Ireland’s relationship with alcohol. However what’s really happening is that people are just consuming poorer qualities of alcohol because of the huge tax content. We call on Minister Alex White to bring forward his proposals to regulate the alcohol sector. Our sector hopes these measures will address the irresponsible sale and consumption of alcohol in Ireland,” she concluded.

Alcohol Beverage Federation of Ireland

The Alcohol Beverage Federation of Ireland agrees that Budget 2014 will be bad for jobs, bad for growth, and will damage an important domestic sector.
“The Minister stated the importance of the agri-food industry to our domestic recovery today, and then imposed a series of punitive excise increases on a vital aspect of this industry,” said ABFI Director Kathryn D’Arcy, “The effects of an 18% increase in excise on beer will be felt by Irish farmers;  the 15% increase in excise on spirits will damage Ireland’s export sector and the 15% increase in excise on wine will damage our international competitiveness as a tourism location.
“Prior to the second consecutive excise hike in as many years announced today, a basket of alcohol products was already over 30% cheaper in Northern Ireland,” she added predicting a resumption in cross-border shopping as a result of the price differentials on alcohol products in the Republic when compared with Northern Ireland as a result of the Budget.

Illegal alcohol trade will continue to rise as a consequence of the excise increase.

“Last year’s excise increase resulted in revenue seizing 3.5 times more illegal alcohol in first seven months of 2013 than it did in all of last year. High excise rates encourage illegal alcohol trade, the 15 to 18% increase in excise announced today will further motivate illegal practice.
“Last year’s excise increase did not yield the returns expected and has served only to damage the ability of the industry to trade efficiently both domestically and internationally. Government should be doing everything in its power to support this important indigenous industry, rather than levelling punitive excise increases at manufacturers and suppliers.”

Irish Wine Association
Last year’s 41% excise increase already meant we had the highest wine excise in Europe and today’s 15% excise increase widens the gap even more, stated the Irish Wine Association pointing out that following today’s increase, €4.78 of an €8 bottle will now go to the Exchequer (in excise and VAT) or 60% of the total cost. By comparison, there’s no excise on wine in Spain, Italy or Germany and just three cent per bottle in France.
"Ireland’s wine industry was decimated after last year’s disproportionate excise increase,” said IWA Chairman and Marketing Director at Findlater Wine and Spirits Michael Foley, “We understand that the Government finances are under considerable pressure however last year’s excise increase has left this important sector of the domestic economy vulnerable and in need of support.”

Irish Spirits Association
And the Irish Spirits Association said the 10c increase of excise on a standard measure of spirits will mean that €16.40 of a €22 standard bottle of spirits now goes to the Exchequer.

The widening gap between VAT and excise on spirits in Ireland compared with Northern Ireland means a return to cross-border shopping is a real risk, pointed out ISA Chairman and Director of Cooley Distillery Willie McCarter.
"As an industry that’s consistently growing exports and creating Irish jobs, it’s vital that we’ve a strong, sustainable business in Ireland,” he stated, “Excise increases damage our ability to trade domestically and could impact on investment, reputation, employment and export potential.  
"Last year’s excise increase did not yield the returns expected and has served only to damage the ability of the industry to trade efficiently both domestically and internationally."

Excise on a 75 cl bottle of spirits will increase by €1.62. This means the total excise on a bottle of spirits will be to €11.93 or €14.67 including VAT.



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