Following a dramatic election, Ireland’s political landscape has changed – almost beyond recognition. Difficult decisions will have to be taken, but these must be informed decisions. While election promises may have offered some populist solutions, consideration must now be given to the real consequences of implementing such solutions.
Each TD’s response – and those of the appropriate Minister – will be published on NOffLA’s blog: http://noffla.blogspot.com
I would like to congratulate you on your recent election to the 31st Dáil Éireann. As the various parties get ready to form a coalition, I would like to draw your attention to the following commitments in the Fine Gael and The Labour Party General Election manifestos.
• A “€1 increase in excise duty on a bottle of wine by 2014” (Fine Gael).
• A “modest increase in excise on wine” (Labour)
Any increase on wine will further impact on our sector that is already facing major challenges as a result of the economic downturn and deep recession, but it will also cost jobs, revenue to the State, and impact negatively on Irish tourism. 2,600 jobs have been lost in the independent off-licence sector in the last three years, with average turnover down between 25-50% as a consequence of the economic downturn, cross-border shopping and the introduction of earlier closing times.
A €1 excise increase will produce a 20% increase in the average selling price of wine through excise and VAT alone. The €1 excise increase is estimated to result in €60m additional revenue – this is based on an assumption that there will be no decline in sales. Following the October 2008 wine excise increase the wine market fell by 10%. This excise increase also coincided with a major increase in cross-border shopping of which the price differential between alcohol North and South was a major contributory factor.
As a consequence, the government cut excise duty in December 2009 which saw a 15% increase in the wine market. The majority of this increase comes from repatriation of business from across the border. Nielsen data shows that wine volumes in Northern Ireland dropped by 10% in 2010 and Kantar Worldpanel Data further shows that cross-border shopping overall has stabilised.
Recent experience suggests that a €1 excise hike will simply encourage consumers to revert to purchasing wine and other products in Northern Ireland where prices will be significantly cheaper. On this basis, it would be reasonable to assume that an excise increase will result in a 10% to 15% drop in in-state purchases.
A 15% drop in sales would neutralise any revenue gained by the State from the excise increase through lost excise and VAT revenues – the excise cost would be about €45m and VAT cost would be €15m. The market decline will lead to further redundancies and unemployment throughout the industry leading to further unemployment. Each job lost in the sector has a direct exchequer cost of €20,000.
While we fully understand the difficult choices that face the incoming government at this time, we believe that any increase in excise on wine will have a detrimental impact on consumer confidence, jobs, and tourism and will reverse much of the repatriation of cross-border revenue achieved over the last twelve months.
We would greatly appreciate your help in this matter.
Chairperson, National Off-Licence Association.