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.

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’.

“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.

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.

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