The DIGI – whose members include Ibec’s Drinks Ireland, Diageo, Heineken and Irish Distillers along with retail sector groups the Licensed Vintners Association, the Vintners Federation of Ireland, the Restaurants Association of Ireland, the Irish Hotels Federation and the National Off-Licence Association – said that Budget 2022 must prioritise industries most impacted by the pandemic with ‘actions’ and not ‘promises’ as high tax rates will delay recovery and cost jobs.
In its 2022 pre-Budget Submission the DIGI called for a 7.5% reduction in Ireland’s excise tax rate, beginning a programme of annual excise reductions to gradually bring Irish rates into line with the much lower EU levels.
Ireland is among a group of outlier countries – Finland, Sweden and the UK – that charge high levels of tax on drinks products relative to the rest of Europe. This is in addition to VAT.
Ireland has the second-highest overall excise rate in the EU and UK, the highest excise on wine, the second-highest on beer and the third-highest on spirits despite Ireland producing some of the world’s most famous drinks products and considering the importance of drinks and hospitality businesses to our economy and Irish tourism.
A 7.5% reduction in excise tax would make an immediate and material impact on drinks businesses, stated the DIGI and this could be introduced overnight to help the industry maintain jobs in 2022 and beyond. Such a policy decision would signal a solution and action-based approach by Government and not another promise according to Liam Reid, the DIGI’s Chair and Corporate Relations Director at Diageo Ireland.
“Employment generation is one of the most important policy issues for the next few years and the drinks and hospitality sector has a strong track record of national and regional job creation,” he said, “It can deliver again.”
In recent data compiled by DCU Economist Anthony Foley on employment in the industry, analysed and published by the DIGI, the Group estimates that the drinks and hospitality industry is set to employ 140,000 people in 2022 – 40,000 fewer than in Q4 2019, the last pre-pandemic quarter.
Among the 40,000 fewer jobs are those involving an estimated 12,700 15 to 24 year-olds and almost 22,000 women. This is despite the broader economy’s ongoing recovery as the country approaches full vaccination.
In April 2021 the CSO estimated, on a Covid-adjusted basis, that the national youth unemployment rate was a daunting 61.8%. In Q4 2019, before the impact of Covid-19, some 31.8% of hospitality employment was in the 15 to 24 age group compared to only 11.2% of total employment.
“Jobs in the industry have a wide regional spread and should be protected as part of our economic recovery,” according to Liam Reid, “Youth unemployment is a particular issue arising from Covid and the drinks and hospitality sectors are well positioned to generate jobs for young people as it is typically a large employer of young workers”.
Additionally, the Group said that the effects of a tax reduction would be felt ‘immediately’ by domestic and overseas consumers, including tourists and that such a policy decision will have the strategic role of helping to rebuild tourism competitiveness which is important for the recovery of international tourism.
“The Irish government takes approximately a third of the price of every drink purchased by a customer or tourist in a hospitality environment” said Liam Reid, “money that could otherwise be invested by the business in developing its product and service to attract customers and tourists, maintain jobs, hire new staff and focus on ways to return to pre-pandemic levels of trade.
“Now is the time to take brave and action-based policy decisions which will have an immediate and tangible impact on an industry which has enormous potential to contribute significantly to our recovery,” he concluded.