Why we pay through the nose for a bottle of wine

When it came to writing the definition of excise duty in his dictionary, Samuel Johnson was not one for sitting on the fence. “A hateful tax levied upon commodities and adjudged not by the common judges of property but wretches hired by those to whom excises is paid,” he wrote.

While the widely accepted dictionary definition of excise has softened significantly since Johnson’s landmark work was published 260 years ago, you wouldn’t have to listen too hard to hear echoes of his disregard for this particular tax, both among consumers fond of a tipple and the State’s wine sellers.

The disdain is hardly surprising. While people give out about the water tax, it is the wine tax that is doing more to drain cash from consumers’ pockets. Since the dawn of the age of austerity, wine has proved to be an easy way to target middle-class wallets and duty on it has increased by 62 per cent just three years.

We are paying about €150 million more in duty on wine now than we were in 2013 (and it’s not as if the duty on wine in 2013 was low).

A bottle of wine attracts €3.19 in excise duty in the Republic, the highest rate in the EU. It is not much better in the UK, where excise is €2.85. Finland is in third with an excise rate of €2.55. Sweden is on €2.03 and Denmark, at €1.17, round out the top five duty spots.

Despite these taxing times, our appetite for wine is increasing. In 1950, just 200,000 cases of it were consumed. By 1990, we got through 1.7 million cases of wine each year, but still it made up less than 10 per cent of the Irish alcohol market.

Today almost 30 per cent of Irish adults regularly drink wine, and the market is worth close to €2 billion. Some 8.5 million cases of wine were sold in Ireland last year, up slightly from 8.2 million cases in 2013. Wine is now the second most popular alcoholic drink in the Republic after beer.

If you leave price aside for a moment and focus on quality, the news is even grimmer. Excise applies at a flat rate and is not linked to the cost of a product. The net result of recent tax hikes means that the actual cost of the wine in a €10 bottle is just 50 cent, with the other €9.50 being swallowed up in packaging, distribution costs and tax. It is even worse when it comes to sparkling wine, which attracts double the rate of excise as its flat cousins for reasons best known to the mandarins in the Department of Finance.

The Grape Depression

A couple of weeks ago an organisation you have probably never heard of released a review of the Irish wine market. The authors of the report – called The Grape Depression – are the Irish Wine Association, which makes it patently self-serving, but that does not make it less depressing.

It highlights the fact that the tax take on a standard bottle of wine is now over 50 per cent, and Irish wine excise is the highest in the EU – although the league table is skewed somewhat by the fact that in 14 member states consumers pay no excise on wine at all, largely because across much of Europe wine is viewed as an agricultural product. Excise on wine is now 106 times higher in Ireland than in France.

The Grapes of Wrath might be a better title for the report, given the level of anger expressed in it.

“Excise is the number one threat to the Irish wine industry,” fumes Michael Foley, the chairman of the Irish Wine Association. He is also the marketing director at Findlater Wine and Spirit Group so could hardly be said to be impartial.

Struggling off-licences

Evelyn Jones is the government affairs director (or lobbyist, to give it a shorter name) of the National Off-Licence Association. Like Foley, she thinks enough is enough. She says her organisation carried out a survey of its members earlier this year and found that, if excise duty were increased again in the next budget, 51 per cent of independent off-licences would struggle to remain open, while almost half would be obliged to let staff go.

Given her role, it is hard not to view her comments as somewhat self-serving, but the bottom line is we pay more excise duty on wine now than we used to. And as a result, an Irish person who spends €10 on a bottle of wine is getting a poorer-quality wine now than they would have in 2011, and a much poorer-quality bottle than their French cousin enjoys.

While alcohol lobby groups are up in arms about the taxes and are anxious to have their say ahead of next month’s budget, there are those who have a very contrary view. “Those who profit from the sale of alcohol attempt to portray excise duty as an excessively punitive measure,” Alcohol Action Ireland states in its pre-budget submission.

“The reality is that our current level of alcohol taxation in Ireland, including both excise duty and VAT, falls €1.6 billion below covering its €3.7 billion cost to society, and that substantial tab is picked up by the taxpayer – while we can put no price on the suffering, ill-health and loss of life that harmful drinking causes.”

It says that alcohol pricing measures, including an increase in excise duty, are “proven, by an overwhelming evidence base, to be one of the most effective ways of reducing alcohol-related harm and, importantly, will also help us progress towards our Healthy Ireland target of 9.2 litres of pure alcohol per capita, down from our current level of 11 litres, following an increase in alcohol consumption during 2014.”

But why should we have inferior wine on our shelves? And why should we have to pay more for it?

Conor Cullen is the organisation’s spokesman and he does not buy the notion that we are being let down by the State when it comes to wine prices.

“Affordability is not the issue. Those campaigning for a cut in excise want to sell more alcohol, plain and simple. We, on the other hand, are concerned about the fact that three people a day die directly as a result of alcohol-related diseases in Ireland. We have a national crisis on our hands.”

He accepts that excise duty is a blunt instrument and believes that the Government should introduce minimum unit pricing instead. It has advantages over taxation, as it targets the heaviest drinkers in society, while having little or no impact on those who drink in a low-risk manner.

IN VINO VERITAS? WHAT PEOPLE ARE SAYING ON TWITTER 

Last week, we asked on Twitter if people thought the Government should cut the excise duty on wine in the upcoming budget. Here are some of your responses:

• Yes. Wine isn’t the problem. Beer isn’t even the problem. The problem is our attitude to it. – Hugh Curran
• No. It’s a luxury item. Bring in more refugees instead. – Ann Connolly
• Just reverse out the silly, regressive €1 per bottle tax. – Andy McGeady
• Yes, especially if they’re bringing in minimum pricing legislation. Wine is a less “misused” drink. – Gráinne Lynch