Concern for recovery of hospitality sector as new report shows Ireland has second highest excise rates in Europe

Industry warns high excise rates will impact on ability of sector to recover and attract tourists back to Ireland

• DCU economist report shows Ireland is an outlier in Europe with the second highest overall excise tax rate in the EU and UK
• Other countries with comparable drinks and hospitality industries, such as France and Germany, charge very little excise tax on their major drinks products
• Excise tax on Irish whiskey in an Italian off-licence is €2.90 compared to €11.92 in Ireland, where it is produced
• As high charges force recovering drinks and hospitality businesses to make ‘growth-limiting sacrifices’, DIGI calls for new industry–government ‘vision’ and long term sustainable policy to build the best drinks and hospitality industry in the world
• DIGI proposes 7.5% reduction in excise tax on beer, wine, spirits, and cider in October’s Budget.

The Drinks Industry Group of Ireland (DIGI) has today said that the industry is deeply concerned about the recovery of the drinks and hospitality sector as a new report shows that Ireland has the second highest excise tax rates in the EU and UK.

The new report, ‘Tax on Ireland’s Drinks and Hospitality Sector in 2021’, authored and researched by DCU economist Anthony Foley, shows Ireland has the second highest overall excise tax on drinks products in Europe, as well as the highest excise tax on wine, the second highest on beer, and the third highest on spirits.

The group say that the high tax rates levied on the industry are unsustainable and uncompetitive and are calling for a reduction in excise tax in Budget 2022 to boost post-Covid tourism and secure sustainable, long-term growth for Ireland’s drinks and hospitality businesses in 2022 and beyond.

Ireland is among a group of outlier countries—Finland, Sweden, and the UK—that charge high levels of excise tax on drinks products relative to the rest of Europe.

DIGI, the umbrella group for the drinks and hospitality industry that includes Ibec group Drinks Ireland, the Licensed Vintners Association, the Vintners Federation of Ireland, the Restaurants Association of Ireland, the National Off-Licence Association, and the Irish Hotels Federation, is proposing a 7.5% reduction in excise tax on drinks products, including wine, beer, spirits, and cider.

The group claims that the effects of the reduction would be felt ‘immediately’ by thousands of hospitality businesses across Ireland, hundreds of thousands of directly and indirectly employed industry workers, and domestic and overseas consumers, including tourists.

DIGI says that Ireland’s high excise tax on drinks products, combined with VAT, high commercial rents, and insurance, forces Ireland’s drinks and hospitality businesses, particularly small exporting breweries and distilleries, to make ‘growth-limiting sacrifices’.

‘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. This kind of growth is exactly what we need to kickstart tourism, drinks exports, and domestic spending,’ said Liam Reid, Chair of DIGI.

International comparisons

‘The Irish Government levies a huge excise bill on drinks products even though drinks businesses and drinks production are key parts of our domestic economy and inextricably tied to Irish tourism,’ said Mr Reid.

In other Western European countries where drinks products and hospitality are of similar, if not greater, importance to economic activity, such as wine in France and beer in Germany, excise tax is far lower.

For example, the French charge just one cent on a glass of wine compared to our 80 cents, while the Germans charge five cents on a pint of beer compared to our 55 cents.

Fifteen European countries in total, including renowned wine producers Italy and Spain, charge no excise on wine. Ireland’s high excise tax on spirits means it is cheaper to buy a bottle of Irish whiskey in an Italian off-licence, where the charge is €2.90 per bottle, than it is here, where the tax is €11.92.

Building the best industry in the world

‘While Government supports have kept businesses open and roofs over heads as part of the immediate-term survival, we need to now consider the long-term, sustainable growth of the industry,’ said Mr Reid.

‘We are restarting from a low point. Thousands of skilled employees have left the industry for good. Many hospitality businesses, particularly in low-population areas dependent on seasonal tourism, simply don’t have the people required to open. That is having knock-on effects on entire communities and regions. The longer this situation lasts, the slower our recovery will be.

‘We need to think ambitiously. As we move beyond the pandemic, industry and government need to work towards a new vision focused on rapid growth: to build the best drinks and hospitality industry in the world. To do this, we need to remove obstacles that make it hard for businesses to grow and Irish tourism less competitive against other European countries. That must include reducing our punitively high excise tax.

‘The power to reduce excise tax rests solely with the Irish Government. It can be carried out overnight without the introduction of new legislation.’

ENDS