Excise tax cut on drinks would reduce tax for thousands of rural businesses overnight – DIGI
DIGI calls for reduction in excise tax on drinks in Budget 2025 as costs facing the industry soar
Recent report demonstrates the pressure the sector is under with an average of 114 pubs closing per year since 2005 – notably high rate of closures among rural pubs
Excise reduction would be an immediate aid to the viability and growth of drinks and hospitality sector
The Drinks Industry Group of Ireland (DIGI) is calling for a 15% reduction in Ireland’s high excise tax rate over the next two years to instantly reduce costs for thousands of rural Irish businesses across the country.
A recent survey conducted by DIGI among almost 600 members – including rural pubs and restaurants across Ireland – found that almost one in four had seen their business costs increase by 20%-30% in the last two years. 15% said their business costs had increased by over 40% in the last two years.
The group says that an excise tax rate reduction would have an immediate tangible impact by cutting tax burden instantly and supporting the long-term sustainability of Ireland’s world-renowned drinks and hospitality industry.
Budget25
In their 2025 pre-budget submission, DIGI has called for a 7.5% reduction in the excise tax rate on drinks, followed by a further 7.5% reduction in 2026. This would gradually bring Ireland’s tax rate in line with the lower average EU norms. In addition to charging VAT on drinks, Ireland levies the second highest overall tax rate in the UK and EU on the drinks industry, second only to Finland. This is a self-imposed competitive disadvantage to Ireland’s drinks and hospitality sector. The government takes a total of 30-35% of the retail price of every drink sold in excise and VAT.
DIGI welcomed reports over the weekend that Minister for Enterprise Peter Burke vowed to fight ‘tooth and nail’ in support of the hospitality industry during Budget negotiations.
International comparison
The magnitude of the variation in excise tax rates between Ireland, the UK and other EU economies is large. Irish consumers pay 55c excise tax on a pint of beer, compared to the Germans who pay just 5c. On a bottle of Irish produced whiskey, Irish consumers pay almost €12 compared to their Spanish counterparts who pay only €2.69 in excise tax. A glass of wine in Ireland incurs an excise tax of 80 cent compared to 1 cent in France – 15 EU countries pay no excise on wine.
This exceptionally high level of excise has had adverse effects on Ireland’s famous drinks and hospitality industry. A recent report – Support Growth: A sustainable Future for Ireland’s Drinks and Hospitality Sector – found that an average of 114 pubs have closed annually since 2005, with this trend rising to 144 in the later 2019-2023 period.
The report, including economic analysis by DCU Associate Professor Emeritus and economist Anthony Foley, also found that pub closures have particularly impacted rural communities, which account for 25.9% of all closures since 2005. This compares with a decline of just 2.8% in Dublin.
With high inflation, hugely increased operating costs – including energy – rising labour costs, staff shortages and a significant regulatory burden, the sector is enormously challenged. In their pre-budget submission, DIGI notes that sales in pubs are also down, with the 2023 levels of volume and value of bar sales still below the pre-Covid performances. DIGI says that a 7.5% reduction in excise will support enterprises and consumers, leading to a range of positive economic effects that will ultimately increase tax revenues, benefiting the exchequer.
This desire for government support for the industry and lowering excise is mirrored by consumers, half of whom, according to Core research conducted in July 2024, thought that the government should reduce excise rates on drinks.
DIGI Chair and Irish Distillers’ Communications and Corporate Affairs Director, Kathryn D’Arcy said: ‘When DIGI’s economic analysis is combined with recent data showing that more than a quarter of rural pubs have closed since 2005, it underscores the urgent need for meaningful and strategic policy measures to safeguard the future sustainability and growth of the sector. We are calling for a reduction in Ireland’s excessively high excise tax rate as a crucial step towards aligning with UK and EU average rates. The impact would be felt immediately, lowering the tax burden for thousands of businesses across the country overnight, particularly in rural areas where the high cost of doing business is felt most acutely. This is a policy that the Government can easily implement and would send a strong signal of support to the sector, offering greater certainty around business costs in an increasingly uncertain time.’
