Home > Dail Eireann debate. Topical issue debate - alcohol products tax.

[Oireachtas] Dail Eireann debate. Topical issue debate - alcohol products tax. (25 Oct 2011)

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Deputy Michael McNamara: I draw the attention of the House to the increase in off-licence sales and decrease in on-licence sales and to some of the consequences of this for the State. Official figures from the Revenue Commissioners suggest two thirds of beer purchased in Ireland is purchased in pubs, with one third being purchased in off-licences. However, industry sources suggest the figure for pubs is somewhat lower and for off-licences is higher.

Currently, there is a 5% per annum reduction in the amount of alcohol purchased in licensed premises. However, there is no such reduction in regard to alcohol purchased in off-licences. We will soon reach a situation whereby half of all alcohol purchased in Ireland will be from off-licences, rather than pubs as has been the tradition heretofore. This has a number of consequences for the State which are not good, the obvious one being a loss in revenue to the Exchequer. Even if the same amount of alcohol was being sold - it is not because there is a decrease in this regard - VAT is at 21%. Therefore if, for example, supermarkets sell beer at €1 per can as a loss leader, which they are and have been doing, the VAT to the Exchequer is relatively small. On the other hand, the VAT to the Exchequer from the purchase of alcohol from licensed premises at a considerably higher price is much greater.
Approximately 60,000 to 70,000 people are employed in the hospitality sector in Ireland, a great proportion of whom are in the pub business as compared with the off-licence sector which, I understand, employs approximately 4,000. A number of jobs are under threat because of the shift from the consumption of alcohol on licensed premises. Approximately five rural pubs are closing every week, with a resultant loss of employment. By and large, pubs are family businesses which employ people on a casual basis. In response to a question from Tourism Ireland brand tracker in regard to what people look forward to doing when visiting Ireland, 46% of visitors from France, 43% of visitors from the US and 40% of visitors from the UK said they looked forward to visiting an Irish pub. Unsurprisingly, no one looked forward to going to an Irish off-licence as it is hardly a unique experience.

I understand the next budget will not be a giveaway budget. It will on the contrary be a painful budget. However, I wonder if the move from consumption on licensed premises to off-licence sales could be addressed in the forthcoming budget, even if this means favouring the sale of alcohol, from an excise or tax perspective, in pubs, which are supervised environments. It is illegal to sell alcohol to a person who is intoxicated. However, people can purchase as much alcohol as they want from an off-licence. I believe many of the difficulties being experienced on our streets is the result of young people purchasing large amounts of alcohol in off-licences, drinking it at home and then going out onto the street. I ask the Minister to try to address this through taxation measures.


Minister for Finance (Deputy Michael Noonan): I thank Deputy McNamara for raising this issue. The Revenue Commissioners is responsible for the collection of tax on alcohol products. Alcohol products tax is charged by reference to the nature of the product. The same rate of tax applies irrespective of the type of premises in which the product is sold. I am advised by the Revenue Commissioners that for this reason data is not available on the breakdown of alcohol products tax receipts between licensed premises and off-licences.


The basis on which alcohol products tax is charged means there is no loss in the yield from that tax to the Exchequer if a product is sold in an off-licence as opposed to a licensed premises. In fact, the lower prices typically associated with off-sales mean the tax incidence is higher in the case of such sales. The rate of VAT is also the same irrespective of where the alcohol is sold but the yield would be somewhat lower from the sale of a particular product when sold in an off-licence given the typically lower prices in that particular sales channel. However, the rate of VAT from any level of expenditure on alcohol is the same regardless of whether it takes place in an off-licence or a licensed premises.


Receipts from excise duties on alcohol products totalled €826 million in 2010, down from €968 million in 2009. Projected receipts for alcohol excise for 2011 are likely to show a slight increase over 2010. The excise duty on allalcohol products was decreased in budget 2010 by approximately 20%. Prior to this, excise duty on beer had remained unchanged since the budget of January 1994, apart from the introduction in October 2008 of a new 50% lower rate of excise for beers and cider of alcohol strength by volume of less than 2.8%. The duty on cider was increased in December 2001 and duty on spirits was increased in December 2002. Duty on wine was increased in October 2008 by 50 cent per standard 75cl bottle and pro rata increases were applied to related products. The Deputy should be aware that the decreases in 2010 applied across all areas regardless of where the products were consumed or sold.


It is accepted that there has been a general trend towards off-sales in recent years. High pub prices, price discounting in supermarkets, the smoking ban and the introduction of random breath testing for drivers have all contributed to this shift towards the off-trade. While this movement is excise-neutral there is a loss of VAT from sales at lower off-licence prices. A report on the Irish beer market in 2010 published by the Irish Brewers Association earlier this year indicated that in 2010 some 33.4% of beer was sold through the off-trade as compared with 28.9% in the previous year. This is in line with anecdotal evidence of a trend over time away from on-trade to off-trade.


Deputy Michael McNamara: I thank the Minister for his detailed response. The loss of VAT from sales at lower off-licence prices concerns me. Perhaps the Minister would consider addressing this issue, even if this means raising VAT on off-licence sales so as to ensure licensed premises are better able to compete. I understand there would be legal difficulties in doing so owing to European Union law. However, as I understand it Portugal applies a higher taxation level for alcohol sold in off-licences. Perhaps the Minister would consider introducing similar measures in Ireland to try to protect the few rural pubs remaining.


Deputy Michael Noonan: The same tax regimes applies in respect of alcohol products whether sold off-trade or on-trade. There is no variation in that regard. There would be no possibility of distinguishing for VAT purposes between off-licences and public houses. Pricing in respect of alcohol will be a key issue in the recommendations of the steering committee on substance misuse, which is expected to be published shortly. The recommendations contained in that report will form the basis for a Government action plan on alcohol due early next year. The Deputy could perhaps commence the debate here and continue it when the report is published. We might be able to make some progress by approaching it from a different direction.


Topical Issue Debate – Alcohol Products Tax
Vol. 744 No.4
Tuesday, 25 October 2011

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