Thursday 6 December 2012

Drinking for your country - 2013

It was Budget Day in Ireland yesterday, an annual festival during which we turn our pockets inside out and dance for the Minister for Finance. He announced a hefty hike in excise duty on spirits, effetive immediately. Let's survey the damage.

Yesterday, excise duty on spirits was €31.13 per litre of alcohol. Today, it is €36.85, a jump of 18%. Let's see the effect on a typical 700ml bottle of whiskey with an ABV of 40%. We'll include VAT (23%) because it's applied on top of the duty.
Tax = €31.13 x 0.7 x 0.4 x 1.23 = €10.72 
Tax = €36.85 x 0.7 x 0.4 x 1.23 = €12.69
The typical bottle of spirits, then, is €1.97 more expensive today than it was yesterday.

Let's look at it a different way. If a bottle of whiskey costs €20, how much of that is VAT + excise duty?
VAT = €3.74
Duty = €10.32
Total = €14.06
In other words, 70% of the cost of a €20 bottle of whiskey is tax. Of course any profits that the manufacturer, distributor and retailer make on that bottle are also taxed. It is more theft than taxation, at these levels.

The great fear of ministers fiddling with alcohol duty is that they will send the citizenry fleeing to Northern Ireland to purchase their hooch, enriching Her Majesty's Revenue & Customs instead of our own. Here's the duty + VAT calculation for the UK, where the duty rate is £26.81 (€33.04) and VAT is 20%.

On that bottle of spirits, 700ml, 40%:
Tax = €33.04 x 0.7 x 0.4 x 1.2 = €11.10
That's still a little more than Ireland. I'm sure that's not an accident.