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Home > Select Sub-Committee on Finance Debate. Finance Bill 2013: Committee Stage (resumed) (continued).

[Oireachtas] Select Sub-Committee on Finance Debate. Finance Bill 2013: Committee Stage (resumed) (continued). (07 Mar 2013)

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Deputy Stephen S. Donnelly:Let us consider the rationale behind the €1 increase on a bottle of wine. Representatives of the industry are telling me it is not the case that the price at which they sell wine increases but that it is multiplied. They have explained the position to me, but I cannot quite remember exactly how the measure works. I believe the way it works is that the supplier must increase the cost by €1, after which the price rises further because of VAT, etc., such that the price charged to the customer increases by significantly more than €1. This stood out for me as being a little unusual. We obviously have very high prices here relative to other European countries. I am not necessarily opposing the increase, but it feels as if the Government has gone too far in one specific area by targeting one group of people, mainly winesellers. What are the Minister's thoughts on this? Might this measure be revised and reversed a little? Perhaps the Minister might rebalance it against others. It appears that one particular product which some very good, responsible businesspeople sell as their only product has been singled out for a major increase. 


I support Deputy Pearse Doherty's point on below-cost selling. The ban operated quite well in Scotland and I encourage the Minister and his team to consider it.


Deputy Michael Noonan:It is another excise increase. There had been no general excise increase on alcohol products since 1994. In the circumstances in which we find ourselves it is legitimate to increase excise duty on alcohol. First, it involves discretionary expenditure. Rather than increase tax where people had no choice but to pay it, it was decided to tax items where there was real choice, as in the case of smoking or drinking alcohol. This is a better way to impose taxation. The yield is very significant on these increases, amounting to €180 million in a full year. When in our debates we realise how difficult it is to achieve a yield of €25 million, €30 million or €40 million, we must acknowledge that a yield of €180 million is significant, especially when there has not been a general increase since 1994 and considering that the market does not seem to be particularly price sensitive. The value of wine sales increased in February. Therefore, the increase did not seem to have any effect on sales.


One aspect of the rationale which the Deputy might describe as unfair or otherwise centred on my desire to have a policy that would restrict the sale of cheap alcohol in off-licences, particularly supermarkets. It has proved beyond my ability to come up with a policy. We tried every which way last year to determine whether we could do it, but we could not find a legal way of differentiating between on-sales and off-sales. We talked about closed containers and all sorts of matters. We ran through the whole gamut but could not find a solution. Our goal can be achieved through minimum pricing orders. That is the approach taken in Scotland, but it has been challenged in the Scottish courts. We will see how it works out. If the mechanism proves to be legal in Scotland, we might be able to move in that direction here. However, in the absence of a solution, one must acknowledge that the imposition of an extra €1 in excise duty on wine represents a greater imposition than that on other alcohol products, amounting to 10 cent. Very little wine is sold in the on-trade; it is the off-licence trade that counts. Certainly, it is skewed and this is not a proportionate imposition of excise duty across the trade. There is more excise duty on wine, but this is because it is largely associated with the off-licence trade.


I was amazed at the statistics and hope I am recalling them correctly. My officials can correct me if I am wrong. When we were making the decision, approximately 24% of all alcohol sales involved wine. I remember reading in the newspaper after the 1969 election that the late Conor Cruise O'Brien, on having his first meal in the Members' restaurant, ordered a bottle of red wine and the manager had to send someone to Mitchell & Son on Kildare Street to get one. There was no wine in-house in Leinster House in 1969. One can see the change in practice that has occurred. That is the thinking behind the tax.


The €1 increase includes VAT. All of the other excise increases also include VAT. Consequently, the 10 cent increase on beer or the unit of whiskey is VAT inclusive. I do not know what the calculation was, but I do know that the result is a straight increase of €1. There is a peculiarity, however. The excise duty on wine and other alcohol products is imposed by volume; therefore, there is no differentiation between a cheap bottle and a dear bottle of wine. A cheap bottle of wine purchased in the local garage attracts an extra euro in excise duty, while a bottle of wine worth €70 purchased in a good restaurant also attracts an extra euro. It is not price related but volume related. I believed this was a little peculiar, but I am not in a position to change it. I do not believe, however, that it is particularly worth changing. That is the only peculiarity I found in the imposition of excise duty on wine.


Deputy Stephen S. Donnelly:It is good to hear about the February sales. However, the Minister should keep an eye on the fact that some of the retailers to whom I have spoken have said that the increase is due to the fact that they are still moving their old stock through. They have not yet had to pass on the increase.

I understand the Minister's intention is that the price in the shop or restaurant should increase by €1. Therefore, it is not a leveraged price increase implicating the supplier. I was told the contrary. Does the Minister mind if I examine this and revert to him? If it turns out that there is upward leveraging, will the Minister examine it?


Deputy Michael Noonan:We will examine it.


Deputy Stephen S. Donnelly:The Minister stated the rationale was that more wine was sold in the off-licence trade than in the on-licence trade. So what? Why is the Minister more comfortable taxing the off-licence trade? If I understand correctly, he is saying his preference is to tax the off-licence trade rather than the on-licence trade.


Deputy Michael Noonan:The rationale is all the work done in the Department of Health on the abuse of alcohol and the measures that should be taken to reduce that abuse, particularly by young people. One of the major focal points is slabs of beer. A can may cost 40 cent, for example. People can purchase alcohol at a very low cost in supermarkets because of the nature of the supermarket trade. Some of the products are even loss leaders and attract young people. In the absence of a coherent policy to deal with this, I imposed the excise duty on wine disproportionately. That is part of what is occurring. It is not just kids who are buying beer; there are people with alcohol problems and they put a bottle or bottles of wine into the shopping basket every time they shop. Alcohol abuse occurs at home, for one reason or another. People are under various pressures in society.


Let us consider the best hope to meet the arguments made by the Department of Health on this matter. The Minister of State at the Department of Health, Deputy Alex White, is very strong on this issue and building on the policy developed by the former Minister of State, Deputy Róisín Shortall. If the proposed solution in Scotland is not knocked in the courts, that would be the route to go down because it could help if it were possible to bring in minimum pricing orders. The argument then would be where to pitch it....

[For the full debate click here]
Select Sub-Committee on Finance Debate
Thursday, 7 March 2013

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