The new report, Tax on Ireland’s Drinks and Hospitality Sector in 2021, authored and researched by DCU Economist Anthony Foley, shows Ireland has the second-highest overall excise tax on drinks products in Europe after Finland.
Ireland has the highest excise tax on wine, the second-highest on beer and the third-highest on spirits among the EU27 and the UK, “even though tourism, inextricably linked to the Irish pub, restaurant and hotel and drinks production are key to our domestic economy”.
The high tax rates levied on the industry are unsustainable and uncompetitive and the DIGI is calling for a reduction in excise tax in Budget 2022 to boost post-Covid tourism and secure sustainable long-term growth for Ireland’s drinks and hospitality businesses in 2022 and beyond.
The DIGI is the umbrella group for the drinks and hospitality industry that includes the Ibec group Drinks Ireland as well as the Licensed Vintners Association, the Vintners Federation of Ireland, the Restaurants Association of Ireland, the National Off-Licence Association and the Irish Hotels Federation.
Ireland among ‘outlier’ countries
Ireland is among a group of ‘outlier’ countries – Finland, Sweden and the UK – that charge high levels of excise tax on drinks products relative to the rest of Europe.
In the report, DIGI Chair Liam Reid explained, “The French and German governments, as well as many others in Western Europe, such as Italy and Spain, recognise that their drinks industries are major employers, generate huge amounts of revenue for the economy through export and tourism and are central to local communities and national heritage and culture”.
The DIGI is proposing a 7.5% reduction in excise tax on drinks products including wine, beer, spirits and cider in Budget ‘22, “beginning a process to bring Ireland’s rates into line with other European countries”.
It claims that the effects of the reduction would be felt ‘immediately’ by thousands of hospitality businesses across Ireland, hundreds of thousands of directly and indirectly employed industry workers as well as domestic and overseas consumers including tourists.
DIGI says that Ireland’s high excise tax on drinks products combined with VAT, high commercial rents and insurance rates forces Ireland’s drinks and hospitality businesses – particularly small exporting breweries and distilleries – to make growth-limiting sacrifices.
“The Irish government takes approximately a third of the price of every drink purchased by a customer in a hospitality environment, money that could otherwise be invested by the business in new staff, new premises, new technology and new products and services,” said Liam Reid, “This kind of growth is exactly what we need to kick-start tourism, drinks exports and domestic spending.”
“The Irish Government levies a huge excise bill on drinks products even though drinks businesses and drinks production are key parts of our domestic economy and inextricably tied to Irish tourism,’ he said.
In other Western European countries where drinks products and hospitality are of similar, if not greater, importance to economic activity such as wine in France and beer in Germany, excise tax is far lower.
For example the French charge just one cent on a glass of wine compared to our 80 cent, while the Germans charge five cent on a pint of beer compared to our 55 cent.
Fifteen European countries in total, including renowned wine producers Italy and Spain, charge no excise on wine.
And Ireland’s high excise tax on spirits means it’s cheaper to buy a bottle of Irish whiskey in an Italian off-licence – where the excise charge is €2.90 per bottle – than it is here, where excise is €11.92 per bottle.
Wine sees an Irish excise levy on a glass of wine of 80 cent where France levies excise of just one cent.
Building the best industry in the world
While Government supports have kept businesses open and roofs over heads as part of the immediate-term survival, we need to now consider the long-term, sustainable growth of the industry, according to Liam Reid.
“We’re restarting from a low point,” he said, “Thousands of skilled employees have left the industry for good. Many hospitality businesses, particularly in low-population areas dependent on seasonal tourism, simply don’t have the people required to open. That’s having knock-on effects on entire communities and regions. The longer this situation lasts, the slower our recovery will be.
“We need to think ambitiously. As we move beyond the pandemic, industry and government need to work towards a new vision focused on rapid growth: to build the best drinks and hospitality industry in the world. To do this, we need to remove obstacles that make it hard for businesses to grow and Irish tourism less competitive against other European countries. That must include reducing our punitively high excise tax.
“The power to reduce excise tax rests solely with the Irish Government,” he concluded, “It can be carried out overnight without the introduction of new legislation.”