High alcohol taxes make it cheaper to buy whiskey abroad and could hamper the recovery in the hospitality sector, an economist has warned.
Ireland has the second-highest overall excise taxes in Europe, according to a report out today by Dublin City University (DCU) economist Anthony Foley.
As a result, it is much cheaper to buy Irish whiskey in an Italian off-licence, where just €2.90 is added in excise taxes, – that’s a quarter of the €11.92 levied by the Irish Government.
Ireland has the highest rate of tax on wine in the EU, the second-highest on beer and the third-highest on spirits.
Most other drinks-producing countries, including France and Germany, have low taxes on their major products, with 15 EU countries, including wine producers Italy and Spain, charging no excise duties on wine.
The Drinks Industry Group of Ireland (DIGI) has suggested a 7.5pc reduction in excise tax on beer, wine, spirits, and cider in the coming budget, which they estimate could have an immediate impact on thousands of hospitality businesses, hundreds of thousands of workers, and domestic and overseas consumers, including tourists.
High excise taxes, combined with VAT, high commercial rents and insurance, force drinks and hospitality businesses to make “growth-limiting sacrifices”, DIGI says.
“The Irish Government takes approximately a third of the price of every drink purchased by a customer in a hospitality environment, money that could otherwise be invested by the business in new staff, new premises, new technology, and new products and services,” said Liam Reid, chair of DIGI.
“This kind of growth is exactly what we need to kick-start tourism, drinks exports, and domestic spending.”
The EU is considering an overhaul of its tax and excise rules this autumn, including a ban on holidaymakers loading up on cheaper alcohol and cigarettes abroad.
An EU study published last year said price differentials between Ireland and the UK encourage consumers to shop in Northern Ireland and could even “incentivise fraud”.
The EU is looking at making holidaymakers pay excise duties at home rates rather than where they buy products, and is studying lower limits on the amount of alcohol and cigarettes holidaymakers can bring back from other EU countries for personal use.