High tax on alcohol is unfair to small Irish businesses

As you load your trolley with booze this Christmas, it’s worth remembering a huge chunk of your money goes straight to the Government, says Leslie Williams

High tax on alcohol is unfair to small Irish businesses

The typical Irish family, we estimate, will spend at least €250 on alcohol for themselves, their guests and for use as presents as they visit family and friends over the Christmas break.

That €250 is made up of six bottles of white wine, six bottles of red, a bottle of Prosecco for Christmas Day, one slab of beer and a bottle of port or sherry.

According to the National Off-Licence Association (NOffLA), that annual shopping spree will cost you approximately €250.65 with a shocking €119.57 of that sizeable bill down to excise duty and VAT.

Alcohol, and in particular wine, is taxed outrageously in this country. Tax on wine has increased 62% in the past two years: so much so that in a €10 bottle of wine, the actual juice makes up just 50c of the cost.

For those of us who love wine for its ability to match food and give added pleasure to a meal, this is not just heartbreaking, it makes us angry. And, don’t forget that our excise duty on alcohol then gets 23% VAT added so we have a tax on a tax. You couldn’t make it up.

As if this wasn’t enough, our excise duty on sparkling wine and champagne is double that of wine.

Hence a Spanish Cava or Italian Spumante Prosecco will have excise duty costs alone of over €6 in Ireland, yet both could cost as little as €1.50 in a Madrid or Milan supermarket.

Is it any wonder so many couples buy the fizz for their weddings in French supermarkets?

Ireland’s duty on wine is over 600% higher than the EU average and is 280% higher for beer and 230% higher for spirits.

Don’t forget that most grapes are grown by small farmers — in Italy the average vine grower has a holding of less than five acres.

Imagine how we would feel if the Italian or Spanish governments decided to tax our butter in the same way?

Kerrygold would cost around €30 and the EU would rightly call this protectionism.

Don’t think it hasn’t gone unnoticed in Brussels either that we tax an EU imported product (ie wine) much higher than one we produce ourselves. The EU does not like trade barriers.

Even though spirits are proportionally taxed less than wine in this country, the duty on spirits is also having an effect.

Remember that we now have a nascent independent distilling industry but a tourist will pay an average of €29.18 for a litre of Irish whiskey here while in the US it costs €16.61 and in Germany €17.56.

I have no doubt that our alcohol taxes have damaged our image abroad.

“I’m embarrassed with tourists that come to my restaurant at how much I have to charge them for a simple bottle of wine, especially when a glass of wine with a meal should be the most natural thing in the world,” says Michael Ryan of Isaac’s Restaurant on McCurtain Street in Cork.

“I simply cannot take an adequate margin on wine any more, and certainly not on sparkling wine or champagne,” he continues.

Mike Ryan of the Cornstore restaurants in Cork and Limerick says: “Wine is an important add-on to our customer experience — we are selling Ireland abroad as a culinary destination but we cannot match quality food and wine at equally fair prices given the cut the Government is taking.”

The off-licence trade has also been badly affected.

“The current high level of excise duty on alcohol is completely unfair on small businesses,” says Gary O’Donovan whose family-run off-licence chain has 16 branches throughout Cork city and county.

“Alcohol is our only product and if we fail to obey the law to the letter we can lose our licence and our livelihood. The large multiples now have over 50% of the alcohol market and use alcohol as a loss-leader to drive footfall and sell other dearer grocery products — we do not have that option so this is not a level playing field,” he adds.

Of course, the supermarkets are only doing whatever they think will bring in customers.

While consumers may enjoy low prices at certain times of the year, would we really only want to buy our wine from large supermarket multiples?

Small importers are responsible for many of the most interesting wines — the bulk of what I feature in my wine column.

A small importer who sells 1,000 cases of wine per month now has to come up with an extra €18,000 for the Revenue as soon as he takes that wine from the bonded warehouse (within 14 days generally).

That importer is usually obliged to give credit of 60 days to his customers. Hence, the large number of mergers and closures in recent years.

Given that banks have cut off credit for small businesses, such as wine importers, how does the Minister expect them to stay in business?

In the off-licence sector, 3,000 jobs have been lost since 2008 and 544 off-licences have closed or lapsed since 2008.

To create a minimum wage job in an off-licence costs around €19,000, according to figures from NOffLA.

But in order to pay that wage, a shop would need to sell over 1,100 cases of wine, which, incidentally, will bring in €53,000 in excise duty and VAT for the Government.

Finally, what about health issues and binge drinking, I hear you ask? Doesn’t a higher price on alcohol decrease consumption?

A ban on below-cost selling might have that effect but an increase in taxes will not and is not.

The large players simply take the hit on extra excise and use VAT returns to recoup 23% of their losses on alcohol sold below cost (as do profits made on other goods you buy while in their shop).

The major players are operating fully within the law but is the law an ass?

Quality wine and craft cider and beers can play a role in the responsible consumption of alcohol given the increased emphasis on matching them with food, but they won’t survive here unless they are taxed fairly.

So let’s raise a glass to quality producers this Christmas and hope they will still be around in a year’s time.

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