Drinks industry seeks 15% budget cut in excise at cost of €223m

The Ibec division that represents the drinks industry wants a 15 per cent cut in excise duties in the budget for all categories of alcohol, a move that would cost the exchequer up to €223 million.

The Alcohol Beverage Federation of Ireland (ABFI), which represents manufacturers and suppliers such as Diageo, made the call in its budget submission last week to the Department of Finance.

It estimates a 15 per cent reduction across the various rates for beer, wine, spirits and cider would cost €181 million, or €223 million after Vat is taken into account. Vat is calculated after excise has been levied.

The drinks industry has lobbied hard for an excise cut in recent years, after the charge was hiked in 2013 and 2014.

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Ireland has come of the highest excise rates in Europe. Patricia Callan, the former Small Firms Association leader who was appointed director of the ABFI in May, says a cut in excise could help spur investment here by drinks companies.

“Most of our members regard excise as a direct cost. What would they do if it was cut? They would reinvest in their operations here and put more money into their infrastructure.”

‘High tax economy’

She also argued that as Ireland is a “high tax economy”, charges such as excise were driving perceptions about the cost of living and leading to upwards wage pressure.

“If we could get more cash back into the economy by cutting personal tax, but also with excise and Vat, you’d see consumption would outweigh the reduction and you’d see a net bounce to the exchequer,” she said.

“By lowering taxation, you can end up with a higher amount to spend, which is the aim.”

Ireland has the highest rate of excise on wine in Europe, the second-highest on beer and the third-highest on spirits. Ms Callan said the high level of excise was damaging tourism by making pub visits more expensive.

Excise is a volume tax, and accounts for about 54 cent to the price of a pint of beer. The drinks industry argues that since 2011, tax increases have added 28 cents to the price of a pint.

Consumption dropping

As the then Minister for Finance, Michael Noonan turned to excise hikes in 2013 and 2014 as a primary revenue raising measure.

However, excise was cut back by 20 per cent in 2010, and before that, it had remained static on a pint for 15 years. The most recent exchequer tax receipts show excise is about 6 per cent behind target.

Critics of the drinks industry, such as health organisations, say a cut in excise would spur more problem drinking. Official data, however, shows that alcohol consumption is falling in Ireland, especially for younger age groups.