Storm in a herbal tea cup as prices to jump by 23pc
TEA drinkers are set to be boiling mad as those who fancy a little herbal twist to their cuppa are about to be scalded when it comes to paying for it.
Herbal tea prices are set to jump by 23pc after the Revenue Commissioners confirmed that such drinks are in a different VAT category to traditional tea.
The ordinary cuppa made from leaves or tea bags is zero-rated and historically the herbal teas, such as camomile, peppermint or Rooibos were similarly treated for price purposes.
But a Revenue spokesman clarified that only teas derived from the tea plant are entitled to be considered zero-rated.
Tea is defined by Revenue as the product derived from the tea plant (black or traditional tea) and zero VAT-rated. But herbal teas are not from the tea plant, and are regarded as herbal infusions at 23pc VAT.
Historically, fruit and plant infusions were being supplied by traders at the zero rate. But Revenue has now told the industry that these are liable for the 23pc rate.
The decision follows a query by a solicitor on behalf of a major distributor.
Yesterday master tea blender Jorg Muller warned that the news would not go down well with herbal tea drinkers.
"Not only will it increase prices, but it will also confuse people. The herbal teas or infusions have become very popular with people everywhere and to make them different from traditional or black tea will make life very difficult for the consumer," Mr Muller said.
His firm Solaris Botanicals, supplies a range of organic speciality teas at the zero VAT rate.
"We will be able to reclaim the 23pc VAT, but people won't buy the herbal teas because they will be disproportionately expensive compared to black tea. It seems that Revenue are now penalising people for making a healthy choice", he said.
Mr Muller has contacted UK revenue authorities, which confirmed that herbal teas will remain at zero per cent.
"It makes things very tricky for us, now that we have to compete with Northern Ireland companies who have a zero VAT rate on their teas," he added.
An industry group has now raised the matter with Finance Minister, Michael Noonan. The Revenue confirmed it would engage with the industry.