Excise tax reduction – a foil against Brexit

If Sterling declines again as a result of a hard or no deal Brexit, British tourists are far more likely to remain at home or spend less if they do visit Ireland. If Sterling declines again as a result of a hard or no deal Brexit, British tourists are far more likely to remain at home or spend less if they do visit Ireland.

Reducing excise tax on alcohol in Budget 2019 is the only chance the Government will have to provide tangible and immediate protection to Ireland’s drinks and hospitality businesses before the Brexit deadline on 29th March 2019, according to the Drinks Industry Group of Ireland  which has again called on Government to reduce excise tax on alcohol - a policy measure which could be implemented today - to protect this industry in the short term as support since a hard or no deal Brexit looks increasingly likely.

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9 October 2018 | 0

A hard or no deal Brexit, one that restricts established trade routes, levies additional duties or tariffs on goods, or sends Sterling on another steep decline, will have significant consequences for Ireland’s drinks and hospitality businesses, particularly those in rural parts of the country, states the DIGI.

The current approach of Government and the EU in taking a long-term view in planning for a no deal or hard Brexit and not focusing on the short-term impacts as well is not adequate, claims the DIGI.

 

Dependence on the British market

Much of Ireland relies on tourism, an industry that’s in turn reliant on the drinks and hospitality industry and the UK is Ireland’s single largest tourism market. If Sterling declines again as a result of a hard or no deal Brexit, British tourists are far more likely to remain at home or spend less if they do visit Ireland.

In terms of employment in the ‘accommodation and food service’ sector, which includes many drinks and tourism businesses, nine counties report a total employment share above the country average of 5.8%.  Six are part of Ireland’s Wild Atlantic Way and in Kerry the employment share is 10.5%.

Furthermore, many of Ireland’s drinks exports are heavily dependent on the UK. More than 70% of all cider exports and 43% of all beer exports are to the British market. Steeper UK levies, waits at the border and other costly barriers will eat into the margins of smaller producers, in many cases to an unsustainable degree.

 

Reducing excise on alcohol

These issues are compounded by Ireland’s disproportionately high level of alcohol excise tax.

Unlike some other taxes and duties which are subject to EU approval, the Government has control over Ireland’s alcohol excise levels. DIGI, in its Budget 2019 submission, says that the Minister for Finance can reduce them immediately as a defensive measure against a hard or no deal Brexit, two increasingly likely scenarios.

 

A reduction in alcohol excise tax would:

  • Defend against Brexit: in the event that Brexit causes exports to slow or tourist numbers to decrease, businesses – particularly those in rural Ireland – will be able to save money otherwise spent on excise
  • Help smaller producers: alcohol excise tax is harder for smaller producers to pay as they cannot spread the cost over a large product range.
  • Make Ireland more competitive: our excise tax is the second-highest in the EU. Reducing it would bring us in line with Europe and make us more attractive to tourists and help Irish drinks businesses.
  • Reward consumers: the Government has pledged to reverse austerity-era tax increases. A reduction in alcohol excise tax would put more money back in the pockets of consumers.

“In less than six months Brexit will become reality,” commented the Director of Communications at Irish Distillers and DIGI Chair Rosemary Garth, “In rural Ireland, where the industry is often the primary or major employer, failure to provide defence against the worst effects of Brexit could lead to job losses, business closures and the shrinking of local economies. At best, one of Ireland’s fastest-growing industries will simply stagnate.

“That’s why we need to take action now. The Government, in its last Budget before Brexit, has the power to make a positive change. By lowering alcohol excise tax, which is already the second-highest in Europe, drinks and hospitality businesses can save money incase exports and tourism numbers drop and invest in new products, new markets and new staff to power through any Brexit-triggered downturn.”

 

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