Budget Submission 2010

11 November 2010
Minister Brian Lenihan T.D.
Government Buildings
Upper Merrion Street
Dublin 2

Dear Minister,

In the context of a severely depressed off-licence retail sector, spiralling business costs and a very nervous consumer, we urge you to address the following issues in the forthcoming budget:-

End the VAT Subsidization Loophole in Below Cost Selling
Retailers should not be allowed reclaim VAT on the loss they are making on products that they choose to sell at below cost purely to drive footfall into their outlets.

Incl VAT Excl VAT VAT
Btl of Wine Cost €10 €8.26 €1.74
Btl of Wine Sold € 8 €6.61 €1.39
-----------------------------------------------
Cost to Revenue € 2 €1.65 €0.35 (VAT refundable per unit)

Therefore every 1,000 units sold results in a VAT reclaim of €350.

All items (not just alcohol) subject to VAT that are being sold below cost are using these VAT credits to defray the cost of these below cost promotions.

Just for wine alone, deep discounting by the multiples last Christmas (2009), resulted in multiple volume growth of 12.5% while independent off-licence volume declined by 12%. Interestingly, from a VAT perspective, this only translated into a value growth of 3.5% in the multiples as opposed to a value decline of 16% in the independent sector. This would suggest that a substantial amount of multiple volumes were being sold at below cost resulting in a huge loss to revenue in the form of VAT credits created by below cost retailing,and this is of just wine alone.

This loophole, as well as the huge buying power of the multiples, is making the survival of the small independent retailer untenable going forward with 95% of the Irish carry-out business being controlled by the big 5 multiples.
 

Reduce our standard VAT rate to 20% thus matching our UK competitors from 1st January 2011
It is imperative that the ROI VAT rate is reduced to 20% thus stimulating consumer spending and further bridging the price parity gap between ROI and NI markets.

Reduce Excise Duty
Reduce Excise Duty on alcohol by 20% based on the positive outcome of the 2010 reduction and its impact on bridging the price parity gap between ROI and NI markets which is still deeply impacting on the border counties.

VAT should not be charged on excise
The charging of VAT on excise duty is effectively double taxation and should be abolished.

We look forward to your response.

Yours sincerely,

EVELYN JONES
Chairperson