Don’t Tax Our Wine Irish Cry as Budget Finds Austerity Threshold
Bloomberg - Dec 6th 2012, 09:05
The Corkscrew Wine Merchants in Dublin did a week’s trade in one afternoon yesterday as shoppers made sure they beat a surprise increase in tax on alcohol.
Irish Finance Minister Michael Noonan said he would raise the levy on a bottle of wine by 1 euro ($1.30), or about 40 percent, at midnight, flocking people to stores before prices rose. At Corkscrew, just off Grafton Street in the city center, customers left clutching crates of bottles.
“It’s been crazy, extremely busy, it hasn’t stopped,” said Paul Foley, co-owner of Corkscrew, who said he took one order alone for about 8,500 euros. “A lot of corporate clients were forced to make the decision to buy today.”
While in the U.K. the debate over booze prices focuses on reducing alcohol abuse, in Ireland it’s about keeping the country’s finances sober. The country so far was lauded by its euro partners and investors for pushing through austerity measures that caused civil unrest in places like Spain.
Noonan yesterday sketched out savings and tax increases worth about 3.5 billion euros, seeking to tame the biggest deficit in the European Union as the government seeks to exit the nation’s bailout program next year.
“Ireland’s government is keen to show they will do what it takes, no matter how unpopular, to keep the adjustment on track,” said Owen Callan, a Dublin-based analyst at Danske Bank A/S, a primary dealer in Irish government debt.
Watched by police, some on horseback and others with dogs, protesters gathered outside parliament after Noonan’s speech, with scuffles breaking out.
With many measures in yesterday’s budget leaked in advance, much of the coverage in the Irish media and Twitter comment centered on his plans to raise alcohol taxes.
“I will definitely buy some wine tonight because of the increase,” said Declan Heaney, a finance worker, outside Corkscrew. “The government is already taking 50 percent of my income. I love wine and it just takes away from that.”
Other countries have been more circumspect when it comes to taxing wine. The French government introduced this week a law that adds 480 million euros in new taxes on beer, while leaving wine alone in a nation famous for its vineyards.
The levies are part of the 24.4 billion euros in extra revenue the government is trying to raise to meet its pledge to reduce its deficit to 3 percent of gross domestic product in 2013 from 4.5 percent this year.
Facing a deficit next year of 7.5 percent, Noonan went after wine. While Ireland is known for Guinness rather than Merlot, his moves may cost more jobs in hotels, restaurants, bars already struggling after the worst recession in the country’s modern history, industry groups said.
Total employment in the drinks industry has fallen by 40 percent to about 60,000 since the economy began to collapse in 2008, and sales in bars and pubs have fallen by at least 35 percent, according to the Drinks Industry Group of Ireland.
“This is a savage blow to our members,” said Adrian Cummins, chief executive officer of the Restaurants Association of Ireland. “It came straight out of the blue. We won’t be able to pass this on to our customers.”
Cummins said his organisation will lobby Noonan to drop the measure. In addition to the wine tax increase, Noonan plans to increase excise duty on pints of beer and cider and spirits measures by 10 cents.
The government is also raising 25 million euros by increasing tax on a pack of 20 cigarettes by 10 cents, and 50 cents for 25 grams of roll-your-own tobacco. A property tax will also be introduced in July, a levy on vehicles will rise and child benefit payments will be cut.
“They are plundering our country,” Marian O’Dowd, a protester who said she is unemployed, attending the demonstration outside parliament. “We are being tortured in this country with savage cuts.”
There is, however, a tincture of good news for wine lovers getting ready for Christmas, as many stores have already bought in their stocks for the seasonal period, according to the National Off-License Association, which represents liquor stores. Wine already in shops is duty-paid.
Concerns remain, though. The organization, which represents 315 stores, said it expects as many as 30 outlets to close next year. Some 75 have shut in the last four years.
“We’ve had a lot of calls already from customers confirming orders at current prices,” said Amy Hemphill, 38, manager of Mitchell & Son’s fine wine store in Dublin’s financial district. “I was expecting about a 10 percent increase, but this is a lot more.”
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