Drink tax threatens 9,000 jobs, says sector

THE Irish drinks industry has called on the Government to avoid raising taxes on alcohol in next month’s supplementary budget amid warnings that 9,000 jobs in the sector are at risk if there is any further increase in excise or VAT.

The Drinks Industry Group of Ireland yesterday expressed concern about the sharp downturn in business after it reported that 2008 was the worst performing year for both the pub and off-licence trade in 25 years.

Overall, alcohol consumption fell by 5.9% last year, while total sales fell by 2.5% to €6.9 million.

Group chairman Kieran Tobin said the weak economy coupled with a large increase in cross-border sales had contributed to the scale of the industry’s poor performance last year.

A new report commissioned by the group claims drinks sales will probably fall by at least 10% this year with the decline in trade placing up to 9,000 jobs in the industry in jeopardy. The group claimed pub staff were particularly at risk, given 1,500 pubs had already closed in the past six years, while it is estimated that 10,000 jobs were lost in the sector last year.

Mr Tobin warned the Government that both jobs and revenue would be lost if it raised alcohol taxes in the budget on April 7.

He pointed out that the group was particularly concerned about the large number of people from the Republic buying drinks in the North, which the industry blames on a combination of exchange rates and the VAT differential between the two jurisdictions.

Mr Tobin said any further increase in alcohol taxes would drive even more people across the border — a phenomenon which had cost the Government €100m in lost taxes last year.

He observed that one-in-eight households had visited the North in the last 10 weeks of 2008, while two British supermarket groups with no outlets in the Republic held 3% of its grocery market.

The €2.2 billion in taxes which the industry had contributed annually to the exchequer in recent years was “no longer a reliable bet”, said Mr Tobin.

“The old ‘reliables’ really no longer live up to their billing,” he added.

The group’s report written by DCU economist Anthony Foley said the outlook for the drinks industry remained very weak given the sharp increase in unemployment and reduction in consumer spending expected this year.

Mr Foley said the Government should not increase taxes on alcohol if it was adhering to its promise to apply fairness to any budgetary measures as it was a regressive tax which affected low-income earners disproportionately.

“They could probably squeeze some more money out of the drinks industry, but the issue is at what cost? It would be at an undesirable economic cost given the state of the economy,” said Mr Foley.

Mr Tobin said raising taxes on the drinks industry would do nothing to reduce the level of alcohol abuse as Ireland already had the highest taxes on alcohol in the EU.

The group also said it was supportive of existing drink driving limits, despite the Government’s commitment to lower blood-alcohol levels this summer.

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