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Ireland ranks second in EU ‘Big 4’ for highest alcohol excise tax – new report

Ireland has highest wine excise in EU, second highest beer excise, and third highest spirits excise, ranking alongside Finland, Sweden and UK, according to report by DCU Economist Anthony Foley

• 80 cents on every glass of wine, 55 cents on every pint of lager, and €12 on every bottle of whiskey go straight to the Exchequer, despite importance of drinks industry to Ireland and EU
• Ireland has the second highest overall excise tax on alcohol in the EU which is also subject to VAT at 23%
• Irish drinks industry generates €2.3 billion in revenue each year, but maturing market, more competition and external events like Brexit could cause slowdown
• DIGI calling for a reduction in alcohol excise tax, says high rate is barrier to growth and Brexit risk given uncertainty and threat of no deal.

Ireland ranks second in the EU’s ‘Big 4’ for overall alcohol excise tax, according to a new report authored by DCU economist Anthony Foley and published today by the Drinks Industry Group of Ireland (DIGI), the umbrella organisation for the Irish drinks and hospitality industry.

The Big 4—Finland, Ireland, Sweden and the UK—comprises EU member states with disproportionately high alcohol excise tax compared to other countries in the bloc.

The country with the fifth highest alcohol excise tax, Estonia, has a rate almost 50% lower than Ireland’s and 33% lower than the last country in the Big 4, the UK. 

The report, Alcohol Excise Tax in Europe: Where Does Ireland Rank?, is the latest in a series of reports examining Ireland’s drinks industry and its contribution to the economy.

When broken down by drinks category, Ireland has the highest excise tax on wine, the second highest on beer and the third highest on spirits.

In addition to excise tax, VAT is also charged on alcohol at a rate of 23% - VAT is charged on the price plus excise.

Key report findings

• The Irish Government charges 80 cents on every 187ml glass of wine, a standard measure in a bar or restaurant. France, in comparison, charges just one cent. Fourteen EU member states, including Italy, Germany and Portugal, charge no excise on wine whatsoever.
• Germany, like Ireland, is renowned for its beer industry. While a pint of lager served in a German pub comes with a small excise levy of just 5 cents, the same drink poured in Ireland has a much larger levy of 55 cents.
• Almost €12 on a 70cl bottle of whiskey bought in an Irish off-licence goes straight to the Exchequer. Excise on the same bottle of spirits bought in a French off-licence is less than €5, and in an Italian off-licence less than €3.
• Ireland’s levy on cider is double that of the UK’s – €94.46 vs €45.51 per hectolitre of product.
• Finland has the highest overall excise tax in Europe (€3,941 per hectolitre of pure alcohol (HLPA)), followed by Ireland (€3,458 per HLPA), Sweden (€3,094 per HLPA), and the UK (€2,782 per HLPA). Estonia, despite being the member state with the fifth highest alcohol excise tax (€1,848 per HLPA), has a rate nearly 50% lower than Ireland’s.

An obstacle in the way of growth

The drinks industry is the fastest growing in Ireland’s manufacturing sector. There were just 4 active distilleries in 2013; by the end of the 2018, there will be as many as 25. In 2012, the number of microbreweries producing their own product was 15. Today that number is 72.

The drinks industry employs 90,000 people, directly and indirectly, in businesses across the country. If tourism is included, much of which is dependent on or enabled by the drinks industry, that number grows to 254,400, or 11.5% of all Irish jobs.

However, neither the drinks industry nor the Irish Government can afford to become complacent: international competition is increasing, the market is maturing, and global events and policies like Brexit and possible trade barriers look set to impact trade regulations and the movement of goods, services and people.

A solution

DIGI, ahead of Budget 2019, is calling on the Government to reduce Ireland’s high alcohol excise tax.

While a tax cut would give more money back to consumers and small business owners, the group also describes it as a ‘defensive measure’ in the face of internal and external threats to competitiveness and revenue generation.

“The drinks and hospitality industry is one of Ireland’s most important,” said Rosemary Garth, Chairperson of DIGI and Communications and Corporate Affairs Director at Irish Distillers. “Together, manufacturers, distillers, brewers, pubs, off-licences, restaurants, hotels the length and breadth of the country generate €2.3 billion in revenue for the Exchequer every year.

“However, as the market becomes more competitive, and events like Brexit exert pressure and pile on risk, that income is no longer guaranteed. While Irish drinks businesses are excellent innovators, there is only so much they can achieve while shouldering the second highest excise tax in Europe.

“A smaller tax would allow businesses to spend more money on expanding into new markets, developing new goods and services, refurbishing and expanding premises, and creating new jobs. Having fewer obstacles in the way of growth and innovation is especially important if British tourism and patronage slows in the event of a no deal Brexit. 

“Ahead of the forthcoming Budget, DIGI is asking the Government to support this industry which account for a significant number of small businesses now and reap the rewards of increased productivity, sales and exports in the near future.”