Increase in smuggling predicted after excise hike

INCREASED smuggling south of the border and heightened shopping in the north has been predicted in the wake of the budgetary increases on cigarettes and wine.

The Irish Wine Association stressed we already had the highest excise on wine in Europe before yesterday’s 25% hike, or 50 cent per bottle. There was no increase levied on the price of a pint of beer.

A 50% reduction of excise on low alcohol beer and cider was introduced from midnight last night.

“We have already seen consumers choosing to travel to Northern Ireland where they can purchase alcohol more cheaply. One in six households in the Republic went to the north to shop over the summer, with alcohol representing a significant part of the savings to be made.

“Today’s announcement makes the savings to be found north of the border even greater and the negative impact on VAT and excise revenue will be heightened,” said Aoife Clarke, a senior IWA executive.

Drinks Industry Group of Ireland chairman Michael Patten expressed disappointment with the increase.

“Last week’s excise receipts showed sales of wine were down 17% in September, contributing to a 6% decline in the year to date. The 50c increase is likely to make that situation even worse. Moreover, the increase in the VAT rate to 21.5% will have a further detrimental effect on the drinks industry.”

Finance Minister Brian Lenihan increased the excise duty on cigarettes by 50c on a packet of 20, inclusive of VAT, from midnight last night with pro rata increases on other tobacco products. This is estimated to yield €16 million this year and €105m in 2009.

Both the Irish Cancer Society and ASH Ireland were critical and felt the budget did not go far enough.

The Irish Cancer Society had lobbied for an increase of €2, which the organisation estimated would reduce tobacco consumption by 10% and deter young people.

Reacting to what he said was a low price increase, John McCormack, chief executive of the society said: “High taxes on tobacco are the single most effective intervention to prevent smoking. This is especially so for young people and those on low incomes. Today’s decision means that the Government is losing a critical opportunity to reduce smoking in the long term, which is causing over 6,000 cancer deaths in Ireland every year.”

A price increase of €2 would have generated €320m in additional revenue to the State, he said. ASH Ireland had also been seeking a €2 increase on the pack of 20.

The Irish Tobacco Manufacturers’ regretted the decision.

“This above-inflation increase on cigarettes will cost the Government in excess of €350m per annum due to lost taxation through increased smuggling of illegal cigarettes.”

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