Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

Irish health food retailers estimate that up to 1,800 jobs will be put at risk when a 23% VAT rate is imposed on food supplements, vitamins and minerals, from March 1.

The issue has been highlighted as a concern by such industry groups as the Irish Pharmacy Union, the Irish Health Trade Association (IHTA) and the Retail Excellence. While it may feel like a coordinated push, there’s certainly no doubting the strength and the immediacy of the concerns being expressed across the groups.

All three of these groups also note that the move will have a serious impact on consumers who rely on supplements in order to maintain their health. A 0% VAT rate on food supplements has existed for the past 40 years. The 23% VAT increase on health products could hugely reduce demand for health supplements and lead to immediate redundancies and closures of some health stores.

David Fitzsimons, Group CEO of Retail Excellence, said: “We were pleased to hear that Finance Minister Paschal O’Donohoe says he will reflect on what the stakeholders have had to say, but with the measure due to be implemented in March, something will have to happen very soon or Revenue will just go ahead with the plan. We would need the Minister to meet with stakeholders in the next few weeks.

We understand that Brexit is causing decisions on many pieces of new legislation to be suspended, but we can’t afford for this measure to just slip through.

Mr Fitzsimons said the relatively small monetary value to Revenue of the VAT increase belies the health impact the measure would have on people who use health supplements to maintain their health. The hike would force most low income people, notably pensioners, to review what they might view as a discretionary spend on their health.

Elderly consumers rely on products such as Vitamin D, glucosamine sulphate tablets and Omega 3 fish oils for the maintenance of normal muscle and bone function, the normal function of their immune system as well as joint flexibility and this rise may be too a step too far for many.

Retail Excellence says the move would act as counter-productive to the Government’s own Healthy Ireland Initiative launched in 2013 which states that ‘wellbeing is valued and supported at every level of society’.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

“Retail Excellence has been working on this with, and on behalf of our members since we became aware of the issue late last year. This move will have a huge impact on retailers, pharmacies and particularly small, independent, family run stores who have been the mainstay of the country’s high streets for decades.

“The shock of a massive VAT hike of 23% on these products has the potential to cause hundreds of job losses across Ireland at a time when the prospect of a crash-out Brexit and the associated negative impact that will have on the Irish economy is all the more real.

“If you are the owner of a health store, you’ll find it hard to survive that kind of VAT increase. If you’re someone who spends €20 on a health supplement, adding 23% to the price could well cause you to stop buying it.”

The The Irish Health Trade Association (IHTA) surveyed its health store members and found that many of its members believe they’ll have to either make some staff redundant or close some outlets after March 1. Their survey suggests the VAT hike will threaten 250 local businesses with closure and put 1,800 jobs at risk.

IHTA spokesperson Alan Martin said: ‘’For the past 40 years food supplements have been sold at the 0% rate, including products such as Vitamin C, Vitamin D and Omega 3 fish oils. The 23% Vat rate needs to be urgently revisited by the Minister for Finance as it will have a major effect on the old, the elderly and the sick.

It is hard to understand the rationale behind this decision.

"Last year the Government introduced a so-called ‘fat tax’, which saw a levy introduced on sugary drinks. Bizarrely, the VAT rate on a fast food hamburger is 13.5%, but the Revenue Commissioners now want to introduce a 23% VAT rate on all health products. We have had a number of meetings with senior officials but nobody is able to explain the rationale behind this decision and why now.’’ According to the IHTA, the immediate introduction of a 23% VAT rate on all food supplements “does not respect people’s health choices’’ and will have a serious impact on small towns across the country, destroying hundreds of businesses.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

Alan Martin added: “This outrageous increase in price of food supplements is will push the cost beyond what many people can afford, such as elderly people and expectant mothers. It will seriously threaten the viability of the health stores and pharmacies who strive to offer this important health service. Health stores are particularly vulnerable because they are small, independent businesses on the main streets of small towns right across Ireland and to see these stores close would be hugely damaging to their local communities.’’

According to an iReach survey commissioned by the IHTA, 71% of Irish people buy vitamins, minerals and other food supplements all year round, with 73% of those regular consumers doing so to “maintain and improve ongoing adult health”.

The Irish Pharmacy Union has also warned against any changes to the VAT rate: “Up until now, most food supplements supplied by pharmacies in Ireland have been exempt from VAT, on the basis that they encourage the maintenance of health, through the sustenance derived from a normal, healthy diet, ie vitamins, minerals, and fish oil products,” said an IPU spokesperson.

The IPU is concerned that applying a 23% VAT rate, across the board, on all these food supplements, will negatively impact their affordability for less well-off people, the elderly, or those with ongoing health issues, who are trying to maintain their health.

Meanwhile, Revenue has explained that it is reviewing longstanding zero VAT concession on vitamins, minerals, and fish oils as it said some traders are “exploiting” the concession by applying it to products that should be paying the standard rate.

Revenue said: “The operation of the current concession has become extremely problematic, because of efforts by elements in the industry to exploit the concession to extend zero rating way beyond the scope permitted by Revenue.

“These elements consistently challenge Revenue guidance and Revenue decisions on the VAT rating of products, and Revenue is very concerned that this action is resulting in confusion and inconsistency generally in the sector, with compliant businesses applying correct VAT rates to their product ranges, while others apply the zero rate to products that are liable to the standard rate.”

The imminent discussions between the sector’s stakeholders and the Finance Minister may well begin with an attempt to clarify which products should qualify for the exemption. Time, however, is running out.

Business Movers

Ray Thorpe has been appointed chief information security officer (CISO) with eShopWorld, e-commerce solutions provider to global retailers selling across North America, Europe and Asia.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

He was previously a senior manager at global standards organisation BSI; he has also served as a PCI security standards council advisor and head of IT and security at payment services and financial solutions firm MyGate Global. He brings vast expertise in data security. He holds a post-grad degree in Management Information Systems from the University of Cape Town and an MSc in Information Security from Royal Holloway, University of London.

Mark O’Shaughnessy has been appointed as new partner and corporate litigator with ByrneWallace as part of the continued expansion of the law firm’s reputation management and crisis management teams.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

He has previously held senior roles with A&L Goodbody and William Fry. He specialises in advising Irish and international companies on corporate disputes, providing early stage strategic and tactical advice to minimise corporate risk during a dispute. He has advised some of Ireland’s leading companies and high profile individuals in times of crisis. He studied Law and Accounting at UL, qualified with the Law Society of Ireland, and holds a diploma in Arbitration, UCD.

Lisa Buckley has joined the independent complaints committee of the Advertising Standards Authority for Ireland, the independent self-regulatory standards body.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

She is currently communications and marketing manager with NewsBrands Ireland, the body for Irish national newspapers, print and online. She will now contribute to ASAI’s complaints committee along with her existing role in NewsBrands, which includes delivering the Journalism Awards, Press Pass News Literacy and Student Journalism programme, and advertising community events. She has previously worked in PR roles with Unique Media in Dublin and with H+A Marketing & PR in Cork.

Jean-Yves Charlier, who was appointed to the Digicel Group board in September 2018, has been announced as Group CEO of the communications and entertainment provider.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

His appointment follows the untimely passing of Digicel Group CEO, Alexander Matuschka von Greiffenclau. A leader in the global telecoms industry, from 2015 to 2018, Mr Charlier served as CEO of VEON; prior to that, he was chairman and chief executive of SFR. Digicel Group is a total communications and entertainment provider with operations in 31 markets in the Caribbean, Central America and Asia Pacific. After 17 years of operation, global investment to date stands at over US$5bn.

Gillian French has been appointed as chief people officer with global connectivity platform firm Cubic Telecom.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

She brings experience in business strategy, leadership development and employee engagement. In her previous role as chief people officer at CarTrawler, she spent 12 years helping to drive growth via leadership and coaching programmes. She has also held a number of management roles at Jurys Doyle Hotel Group. She will oversee all aspects of people development, culture, relationships, policies and practices at Cubic Telecom. She will perform a central role in implementing well-being initiatives and increasing operational flexibility, while also working with each team to drive the company’s corporate strategy. Gillian has been recognised for empowering female leaders by winning the Deloitte Fast 50 ‘Leading Female’ award in 2017 and has completed a programme in Executive Women in Leadership at IMD.

Sinead Dennis has joined creative marketing agency The Public House in Dublin, and will head up the agency’s account management team.

Grapevine: Thousands of jobs at risk as health supplements face 23% VAT hike

A former winner of IAPI’s “One to Watch” initiative, she joins from Core, where she was business director working across the agency’s client service team. She has also worked with several Dublin agencies, including TBWA Dublin where she was head of client integration and account manager. She also worked with Cybercom (now In the Company of Huskies) and Leo Burnett Dublin. Clients of The Public House include EPIC, Donegal Catch, Cadbury, Mount Juliet, Jameson, Paddy Power and 123.ie. The agency is also seeking to recruit a number of other people including a senior creative team member and a senior planner.

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