Sunday, October 13, 2013

Budget 2014 - the beforemath....

It’s late Sunday evening and I’m about as far away from Irish news as could be possible. In fact, I’m surrounded by millions of tiny fruits flies, covered in bits of dried grape “gunk” and I look like someone just split my head open with an axe – but thankfully it’s just fermenting grape juice.

But even here, the Budget looms large. Not so large that we’ll all take a break on Tuesday afternoon and gather round the internet radio and listen to Minister Noonan’s speech – but more that whatever happens in terms of any changes to Excise Duty has a direct impact on the success, or otherwise, of the endeavours of all those around me. It seems inconceivable that the Minister takes more than the average winemaker gets for labouring all year – but I’m probably a bit too close to it all at the moment……

However, I have been asked to write an “opinion” piece on the Budget and what is announced by Minister Noonan on Tuesday. I just thought I might give it a go now – get it out of the way, in advance of the budget – just in case I fall into a vat of fermenting juice, or get abducted by aliens, or win the Lotto…

So here’s my piece on what happened in Tuesday’s Budget, before it happens…..

Yesterday’s Budget brought a mixed bag of changes for the Irish Wine trade. It has been apparent for a good while now that the lack of an effective lobby group – or indeed any group at all that represents wine importers and retailers exclusively – has meant that our little voices are never really heard. The big boys looking after beer and spirits can make a lot of noise – look what happened to wine at the last Budget.

But at least there has been some relief – albeit possibly temporarily – and for once there seems to be some joined-up thinking in relation to the taxation of alcohol in Ireland.

-          The 50 cents per bottle (incl. Vat) reduction in Excise Duty for Wine is most welcome. With falling sales and smaller independent wine retailers feeling the pinch – actually more like getting whacked over the head with a mallet – it would be nice to think the Minister took heed of our plight. The reality is that it was more likely to be potential EU pressure on the disproportionate taxation of wine that brought about this reversal. And any budget is always a mix of give and take… the take will come later.

-          The increase of 10 cents (including Vat) on a pint of beer seems fair in relation to the way in which other alcohol, primarily wine, has been taxed. It brings the relative taxation of the two much closer together – something that should have been recognised sooner. This additional revenue will more than make up for that lost by reducing the Excise on wine.

-          The commitment given by the Minister to introduce legislation to ban below cost selling of alcohol is long overdue and very welcome. The incongruity of raising taxes on alcohol with protecting “Health” as the reason, whilst simultaneously allowing it to be sold by the choice of the retailer at the same price of a large bag of crisps never seemed to bother the Minister. But at least the message seems to have got through. Below cost selling of alcohol is not only irresponsible, but it also costs the State as the retailer can claim a Vat rebate on the difference between the cost price vs. the (lower) sales price.

-          A reorganisation of the licencing charges is also welcome. It undoubtedly favours the smaller, independent retailer – but why shouldn’t it? We should be protecting diversity – and those who sell more, should pay proportionally more. This also fits with the Health objectives. Holding the current annual fee the same for wholesalers and retailers with turnover of less than €750,000 from all alcohol sales, and increasing it by 0.5% of turnover above this level makes sense.

-          The proposal to introduce a so-called “lid tax” is potentially the most contentious issue. Thankfully the Minister has given notice of his intention to legislate in this area in the future– rather than introduce an ill-conceived scheme in this Budget without due consideration. The potential legislation is complex – would it be a flat tax on all sales revenue, or different rates based on alcoholic strength? And will all alcohol be taxed fairly and proportionally? Furthermore, the idea for this tax grew from the desire to find a replacement source of revenue for sporting organisations who say they will lose out if alcohol-related sponsorship of sporting events is banned. So would the revenue from this tax be ring-fenced for sporting bodies – and what is the exact legislation proposed in relation to the sponsorship ban? So there are many complex issues to consider –and if it is to be done successfully and intelligently, it takes time -  but it will most likely lead to some form of increases in the next Budget, but thankfully not for now.
So overall, from a purely wine-related perspective it was a welcome budget.

But was it……?

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