“Completely unsustainable”: drinks and hospitality industry urge immediate change to tax policy as level 3 lockdown will mean incalculable damage to pubs, restaurants and hotels

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Call comes as new economist report reveals Ireland continues to have the second highest drinks excise in the EU

  • Appeal made as Dublin is set to remain at Level 3 for up to six weeks while the rest of the country moves to Level 3 of the Government’s Covid-19 roadmap tonight which will further devastate the industry with restrictions and enforced closures of hospitality businesses
  • As many as 114,000 jobs in accommodation and food services, which includes drinks and hospitality, could be lost by the end of 2020
  • Report launched as National Competitiveness Council report said that Ireland was the fifth most expensive place in the EU to do business
  • Ireland’s beer excise is 11.4 times higher than Germany’s, even though both countries produce and export internationally recognised beer products
  • High excise levies mean Ireland’s drinks and hospitality businesses, many shut without income for over half a year so far, face a tougher reopening and recovery period
  • DIGI chair calls for 15% minimum reduction in excise tax on drinks products as ‘exorbitantly high rates of tax is indefensible for a sector unfairly and disproportionately impacted by Covid-19. Wets pubs in Dublin have yet to reopen, seven months in.’

A new report by the Drinks Industry Group of Ireland (DIGI) shows that Ireland continues to have the second highest overall rate of excise tax on drinks in the EU.

As the county moves to Level 3 lockdown – with many outlets set to shut again, restrictions on those that have outdoor facilities to remain open, restaurants and hotels becoming restricted further, while Dublin is set to remain at Level 3 for up to six weeks – DIGI is calling on the Government to reduce the tax burden on these businesses.

‘We’re in a situation where the hospitality industry is unfairly and disproportionately impacted as a result of Covid-19. Wet pubs in Dublin have yet to reopen – seven months later – and the Level 3 ban on indoor seating for every other licensed premises mean many will shut their doors. Allowing these businesses to reopen, whenever that might be, with exorbitantly high rates of tax to pay is indefensible,’ said Liam Reid, Chair of DIGI.

Ireland has the highest excise on wine in the EU, the second highest on beer (behind Finland), and the third highest on spirits (behind Sweden and Finland).

The report, Tax on Ireland’s drinks and hospitality industry: how Ireland’s excise tax on drinks compares with other EU countries and the UK, commissioned by DIGI and written by DCU Business School economist Anthony Foley, puts Ireland second of the excise league table, despite producing and exporting some of the world’s most renowned drinks products, such as stout (54 cents of excise on every pint served) and whiskey (60 cents of excise on every glass served).

In comparison, in beer-producing Germany, excise of only five cents is levied on a pint of lager. In France, only one cent of excise is levied on a glass of wine. In Italy, Spain, and thirteen other EU countries, no excise is charged on wine.

Liam Reid labelled the government’s excise and tax policy “completely unsustainable”:

“The Irish government is taking back taxes of approximately a third on every drink purchased by a consumer at a pub or restaurant. With the country moving to Level 3 and the current restrictions on the hospitality in place, this level of taxation immediately pushes most hard-pressed businesses into a loss-making situation.”

For Ireland’s drinks and hospitality businesses, our high rate of excise tax is another barrier, alongside VAT, commercial rents, and insurance, to a successful reopening and a speedy recovery. The National Competitiveness Council’s 2019 Cost of Doing Business report states that Ireland was the fifth most expensive place in the EU to do business.

Ireland’s pubs endured the longest lockdown in the EU (with Dublin’s still in limbo and country pubs restricted and, in some cases, closing tonight) and were the only ones to be separated into “wet” and “food-serving” categories. As the country moves to Level 3, thousands of additional pubs, bars and restaurants are being forced to shutter indoor areas for the second time this year, and a significant proportion will be completely unable to trade.

Even when they had been open, due to Covid-19 restrictions, most restaurants are still operating at 60% capacity, pubs at 50%, and hotels at 25%. DIGI analysis shows that as much as €60 million in stock, including food and drink, has been written off by the industry because of the government’s stop-start approach to lockdown.

The Minister for Finance himself last week recognised the emergence of a “dual economy” in Ireland, whereby multinational companies continue to perform well despite the pandemic and lockdown, but domestic industries, like drinks and hospitality, face a far more uncertain future, and as the Central Bank noted today, with a disproportionate negative impact on jobs.

This was confirmed in a recent DIGI report that showed that as many as 114,000 jobs in accommodation and food services, which includes drinks and hospitality, could be lost by the end of 2020 and early 2021 without strong and immediate government action. Young people, women, and rural areas are particularly at risk of unemployment.

Mr Reid continued: “Though they face hardship, Ireland’s drinks and hospitality business owners have adapted to the pandemic, investing thousands of euros in masks, partitions, Perspex screens, and deep cleaning to keep their staff and customers safe, and their doors open.

“DIGI believes it is now time for the government to adapt as well. In the interest of a fair and rapid economic recovery that will benefit thousands of businesses, rural Ireland, and young people, we strongly urge the government to reduce excise tax on drinks products by 15% minimum in Budget 2021. This can be done overnight, requiring no new legislation.

“This is a highly targeted measure that would have an immediate effect on the drinks and hospitality industry, putting more money back in the pockets of hoteliers, publicans, restauranteurs, brewers, and distillers, allowing them to quickly re-hire staff, service debt, offset reduced capacity penalties, and prepare for a challenging economic period.” 

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