This dramatic increase in excise duty on wine – which now has the highest excise rate in Europe -will hit restaurants and pubs at a time when consumer spending is “on the floor”, according to the Restaurants Association of Ireland.
DIGI said that while it fully understands the difficult economic position that confronts the Government, any revenue raised through these taxes would be offset by further market declines and job losses throughout the drinks industry and could potentially cost the Exchequer by provoking a return to cross-border shopping.
The IWA added that small retailers and the hospitality sector will bear the brunt of the reduction in sales that the decision would provoke.
The Budget has done nothing to tackle below-cost selling and RAI Chief Executive Adrian Cummins described the Budget as “very short-sighted”.
And IWA Chairman Philip Robinson commented, “The imposition of such a draconian excise increase will be devastating to the domestic wine market. The latest Revenue Commissioners data shows that in the year to the end of September, the wine market was down 3.9 per cent with these declines set to continue for the foreseeable future given current economic forecasts”.
The increase would impact further on consumer confidence that is crucial to the hospitality sector and runs absolutely contrary to boosting tourism through initiatives such as The Gathering and last year’s decision to reduce the lower rate of VAT, stated DIGI Chairman Kieran Tobin who added, “Given the weakness in the domestic economy and pressures on discretionary income, the drinks industry has endured significant sales declines and the loss of thousands of jobs. Total employment stood at approximately 100,000 jobs before the deep recession, but latest estimates put that figure at less than 60,000. At the same time, pubs and bars have suffered a sales decline of over 35 per cent.
“In this context, the excise increases announced today simply further the burden on pubs, bars, restaurants, hotels and independent off-licences and put more jobs, businesses and livelihoods at risk.
“It will also act as a major disincentive for the Irish public and visitors to spend money in the wider hospitality sector that remains a crucial part of the economy while simultaneously encouraging consumers to travel to Northern Ireland to purchase alcohol and other goods.”
He went on to state, “Irish drinks exports continue to perform extremely well on international markets and that success is built on a solid domestic base. While the drinks industry will continue to work with Government on strengthening our export performance, it is very regrettable that they have jeopardised the market at home through today’s decision”.
“Those declines will be significantly exacerbated given today’s decision”.
The IWA’s Philip Robinson added, “Wine is also a key component of the tourism experience and the most critical factor (approximately 70 per cent) in a restaurant’s profitability. In rural areas, local pubs and restaurants survival depends on this profitability and the employment it generates (the hospitality industry employs approximately 10 per cent of the entire national workforce). The increase will impact on the Government’s efforts to make Ireland a more cost-effective tourism destination”.
In calling on the Government to reverse its Budget increase on wine excise, he stated, “The overwhelming majority of wine products will be cheaper in Northern Ireland and will lead to a major surge in cross border shopping. This will create a lose-lose situation for the Government. Revenues from sales will be lost due to declining market share to the benefit of the British Exchequer while local jobs, business and livelihoods will be put at risk in the retail and hospitality sectors particularly in the border region”.
The decision to leave the tourism VAT rate at nine per cent was welcomed by the RAI but it felt that the Government had “squandered an opportunity in Budget 2013 to address the shortage of chefs at all grades, which has now reached crisis levels”.