Sterling move sparks alchohol duty cut calls

No change expected in Budget despite hospitality group's fears

5th October, 2016
Hospitality group wants excise duties cut in Budget. Pic: Pixabay
Sterling wavering. Pic: Pixabay

The hospitality sector has taken the opportunity provided by sterling's recent slide to intensify its campaign to have excise duties cut in next week's Budget. A report in the Sunday Business Post indicated that duties on alcohol were unlikely to be raised in Tuesday's Budget.

The British currency slid to a five-year low against the euro earlier this morning as traders reacted to speculation that Britain is facing a so-called hard Brexit. Declines this week were sparked by British Prime Minister Theresa May's remark on Sunday that the two-year withdrawal process would begin in the first quarter of 2017. The euro was trading at just over 88p against sterling by lunchtime, having earlier touched 88.43 pence, its weakest since September 2011.

In response, Support Your Local, a campaign backed by publicans, restaurants, hotels and other hospitality services companies, called on Finance Minister Michael Noonan to cut excise, warning that sterling's fall was a major challenge to an industry which employs more than 200,000 people.

The chief executive of the Licensed Vintners Association, Donal O'Keeffe, said the average Irish drinker was now paying more than twice the alcohol-related tax than the average drinker in Europe. "The combination of sterling devaluation, Brexit uncertainty and higher excise could cripple our industry." he warned.

The Restaurants Association of Ireland, meanwhile, said an excise cut of 15 per cent would stimulate employment and help to prevent cross-border shopping. Its chief executive Adrian Cummins said a recent poll of its members had found an average fall of 12 per cent in spending by British tourists in July and August compared with the same time last year.

Padraig Cribben, chief executive of the Vintners' Federation of Ireland said high excise rates negatively effect the tourism potential of the industry. The director of the Alcoholic Beverages Federation of Ireland, Ross MacMathuna, rejected the argument that raising the price of alcohol could tackle misuse, saying that those who drink inappropriately tend to be the least price-sensitive.

The calls for a cut in excise on alcohol come as the Government is planning to introduce minimum unit pricing for alcohol as part of its Public Health Alcohol Bill, which also includes compulsory health warnings on beer, wine and spirits sold in Ireland. A number of EU countries have raised objections to the proposal, however. Groups campaigning against alcohol abuse, such as Alcohol Action Ireland, have also called for an increase in excise on alcohol.

Excise on alcohol has not been changed in the past two Budgets, following increases in 2013 and 2014. According to tax documents prepared by the Department of Finance for this year's Budget, Ireland has the highest rates of duty on wine and the third-highest for beer and spirits in the EU.

The Tax Strategy Group also said that excise as a proportion of the total price of a price of a pint of stout sold in a pub in 2016 was actually lower than it was in 2003 (12.4 per cent compared with 13.9 per cent in 2003). But the group said that as retail prices had risen in the pub trade, they had fallen in the off-licence sector, meaning that excise as a proportion of price is much higher. For example, excise makes up more than 25 per cent of the price of a can of lager, more than 30 per cent for a bottle of wine and 46 per cent for a bottle of whiskey.

The calls from the hospitality industry also come at a time when the special 9 per cent VAT introduced to help the sector at the height of the recession us being questioned.

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