Something unusual happened last week in Ireland: our Minister for Finance reduced the price of alcohol. The price difference between here and Northern Ireland was enticing hordes of southerners across the border to load up on wine and spirits. While there, they were picking up the rest of their weekly shop. The government estimated the loss in VAT and excise for 2009 at between €72m and €112m.
To reduce the incentive to travel north, excise duty was reduced in the 2010 budget from €39.25 to €31.13 per litre of alcohol. There was an extra bonus too, with a drop in VAT from 21.5% to 21% (effective from Jan 1).
So what does it mean for a typical bottle of whiskey, 70cl, 40% ABV? We'll calculate the excise duty plus VAT on that duty before and after the budget:
40% * 0.7 * €39.25 * 121.5% = €13.35
40% * 0.7 * €31.13 * 121% = €10.55