DIGI warns against increasing excise duty on alcohol

The drinks industry has called on the Government to avoid any increase in alcohol taxes in the forthcoming Budget in its pre-Budget submission.

Ideally, it would seek a reduction in alcohol taxation from its internationally high level as well as “in recognition of the weak state of the substantial economic asset which is the drinks industry”.  

However DIGI recognises that the poor economic situation and the severe difficulties with the public finances and borrowing make it very difficult to reduce taxes for 2013, so avoiding increases in alcohol excise would provide a positive message and support the Government’s ‘Gathering’ initiative in 2013, it argues.

According to DIGI, the recommendation to avoid increases in alcohol taxation in Budget 2013 reflects:

•  the continuing weak economic and public financial position in 2013
•  the large economic and employment contribution of the drinks industry
•  the substantial contribution of the drinks industry to tourism
•  the need to support The ‘Gathering’ initiative in 2013
•  the need to support tourism competitiveness
•  the ongoing decline in average adult consumption which peaked in 2001 at 14.44 LPA and was 11.71 in 2011 and likely to decline in 2012
•  the need to have a solid domestic market base to support a strong and growing export performance
• the relatively high alcohol taxes in Ireland compared to the large majority of other EU members and especially in important tourism markets such as Germany and France and in popular destinations for Irish tourists going abroad
• the very weak position of the on-licence segment of the drinks industry which is experiencing large-scale volume declines, large employment declines and significant numbers of closures
• the continuing decline in the domestic drinks industry in the early part of 2012 as measured by retail sales and Revenue Clearances
• the weak position of the independent off-licence sector which is losing market share to the multiples
• the impact of the severe lack of access to credit for public houses and independent off-licences
• the need to support economic recovery and economic confidence.

In the first three months of 2012 alcohol clearances declined by five per cent. In the first five months of 2012 retail sales volumes in bars declined by 8.2 per cent. Between 2007 and 2012 bar sales volumes declined by 35.5 per cent compared to an overall retail sales volume decline of 13.5 per cent, stated DIGI.

“Economic forecasts indicate that consumer expenditure volume will perform poorly in 2013,” it states, “Because of the discretionary nature of much of the expenditure on alcohol, the weak overall consumption performance will be associated with a weaker on-licensed alcohol expenditure performance.  Substantial numbers of public houses are going out of business. According to the latest Revenue Commissioners data there was a decline of 559 or 6.2 per cent in the number of publican licences between 2009 and 2011. The independent off-licence sector is also in a very difficult economic position as the multiples continue to increase their share of the off-licence alcohol market.”

The drinks industry is striving to recover the lost domestic economic output through increased efficiency, export markets, domestic marketing and promotion and product and service improvement, states DIGI but recovery in the current weak economic environment is very difficult. Increases in alcohol taxation in Budget 2013 would substantially curtail these efforts and put the industry’s substantial contribution to the economy under additional threat, it concludes.