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Irish Food Industry Seeking Budget Tax Breaks

by Jason Gorringe,, London

24 August 2017

Industry group Food Drink Ireland has called on the Government to retain the nine percent rate of VAT for the hospitality industry and to scrap its planned tax on sugary drinks.

In its pre-Budget submission, FDI warned that the impact of the UK's withdrawal from the EU will be felt acutely among sectors of the economy that are reliant on the UK. Agrifood is particularly reliant upon the UK market.

FDI recommended that the Government put in place a multi-annual framework to help businesses deal with the effects of Brexit. It said that funds should be targeted at supporting innovation, market diversification, upskilling and capital expenditure. It added that the Government should work with the European Commission to deliver a temporary state aid regime that allows for enterprise stabilization funding to be released for otherwise viable businesses.

On the tax front, FDI said that the Government should retain the nine percent VAT rate for the hospitality sector and invest in the country's regional tourism infrastructure. It also noted that Ireland has some of Europe's highest taxes on food and alcohol and that any further increases in these taxes "at a time of great uncertainty around customs regimes risks encouraging the development of a mature grey market along the border counties at a great loss to the Exchequer."

It stressed that "The threat of increased cross-border shopping and black-market activity due to Brexit and a more volatile Sterling means that Ireland will have to keep a careful watch on relative prices for consumer goods."

The submission recommended that the Government reduce alcohol excise by 3.5 percent across the board, with no level increases to other excises, and retain VAT rates at their current levels.

The submission also criticized the Government's plans for a tax on sugar sweetened drinks, to which it said a 23 percent rate of VAT already applies. It said: "FDI is opposed to the principle of discriminatory taxation on particular types of food and drink products. Furthermore, scientific evidence proving that taxation represents an effective means of changing consumer behavior and of successfully tackling population obesity and other lifestyle-related non-communicable diseases is inconclusive."

FDI said that scrapping the plans would "protect consumers and businesses" and "discourage cross-border shopping and grey and black market trade."

FDI Director Paul Kelly said: "Almost 40 percent of our food and drink exports (EUR4.1bn) go to the UK. Our industry has already been severely impacted by exchange rate exposure, with the value of trade to the UK reduced by EUR570m in 2016. The continuing weakening of Sterling will cause further reductions to the value of exports as well as job losses."

"Budget 2018 must support our efforts to maintain strong markets in the UK, as well as ensuring that food companies in the domestic market remain competitive against imports and the threat of cross-border shopping. To do this we need to keep business costs under control."

TAGS: VAT rates | tax | business | European Commission | value added tax (VAT) | Ireland | United Kingdom | excise duty | Health tax | food | tax reform | trade association | trade | European Union (EU) | Europe

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