THE PRICE OF THE FESTIVE SPIRIT

How duty pushes up what you pay for your tipple,

THE Christmas season is truly under way and just as our spending on indulgences and gifts soars this time of year, so too does the amount of ‘stealth tax’ we pay. Stealth taxes — such as value added tax (VAT) and excise duty — are those typically paid when you buy or pay for something. Excise duty is paid on alcohol and cigarettes. VAT is often paid when you buy something in a shop or restaurant — or if you treat yourself to a haircut, trip to the cinema or theatre, or night away in a hotel.

As VAT of up to 23pc can be charged, this stealth tax could push up the price of a purchase by almost a quarter. Excise duty and VAT combined, meanwhile, could account for as much as 80pc of the price of a bottle of alcohol.

“Most of us pay more VAT around Christmas time than we do at normal times of the year because so much of the items we buy — such as presents and toys — attract the 23pc rate of VAT,” said John Stewart, director of Deloitte’s indirect taxes team.

Stealth taxes are effectively a double tax. “You’re taxed on your wages — and then when you spend those wages, some of what you spend often goes on tax as well,” said Stewart.

So how much of your festive spending could end up in the taxman’s pocket?

BAILEYS: 50PC TAX

Baileys is a popular alcoholic tipple around Christmas. Around half of what you pay for a bottle of Baileys in your supermarket or off-licence goes to the taxman. Let’s say you buy a 700ml bottle of Baileys Original Irish Cream for €16 in your supermarket. VAT accounts for €2.99 of the price of such a bottle and the excise duty comes to €5.07, according to the Revenue Commissioners. So the total tax paid on a 700ml bottle of Baileys comes to €8.06 — about half its price tag.

WINE: 50PC TAX

The Government pockets more than €5 in tax from every €10 spent on a standard bottle of wine in Ireland. Let’s say you buy a 750ml bottle of sauvignon blanc for €9.25.

Taxes (including excise duty and VAT) account for €4.92 of the price of such a bottle, according to the Drinks Industry Group of Ireland, which represents the drinks sector here. So, in this case, tax accounts for about 53pc of the price of a standard bottle of white wine.

The tax burden on a glass of wine isn’t much lower. Let’s say you buy a 187ml bottle of white wine — the equivalent of a medium glass of wine — in your off-licence for €3.

Tax accounts for €1.35 of the price of that bottle — of which 79c is excise and 56c is VAT, according to Revenue. So 45pc of the price of this small wine bottle goes to the taxman.

VODKA: 80PC TAX

Four fifths of the price of a bottle of vodka could go straight to the taxman. Let’s say you pay €25 for a one-litre bottle of Smirnoff red label vodka in your supermarket.

About €20.63 of that goes to the taxman, as excise duty accounts for €15.96 of the price while VAT accounts for €4.67, according to Revenue.

GUINNESS: 28PC TAX

The Government pockets about €1 in tax out of every €4 spent on a pint of the black stuff. A pint of Guinness could set you back as much as €6 today — depending on the pub.

The total tax paid on a €6 pint of Guinness is €1.67, of which €1.12 is VAT and 55c is excise, according to Revenue.

CIGARETTES: 80PC TAX

About €4 out of every €5 spent on a pack of cigarettes goes to the taxman. Let’s say you smoke John Player Blue and pay €13 for a 20-pack of the cigarettes.

Tax accounts for €10.51 of the price of such a pack — as the excise comes to €8.08 and the VAT comes to €2.43, according to Revenue.

So bear this in mind before reaching for the cigarettes this Christmas — even if the expense of the festive period, and the family arguments which the season can sometimes trigger, increase your tobacco craving.

CIGARS: 55PC TAX

Cigars are often bought as a Christmas gift. Tax could account for more than half of the price of a box of cigars.

The total tax on a 10-pack of cigars priced at €13.50 comes to about €7.37 — including excise of €4.85 and VAT of €2.52, according to an estimate from Revenue. The excise paid on cigars depends on the weight of the product.

COCA-COLA: 33PC TAX

Many families stock up on soft drinks for the festive season, with Coca-Cola being one of the favourites. About €1 out of every €3 spent on a bottle of Coca-Cola goes to Revenue.

As Coca-Cola (original) has 10.6g of sugar per 100ml, it’s hit with the highest rate of sugar tax — a rate of 24.39c per litre.

The sugar tax on a 1.5-litre bottle of Coca-Cola is therefore 37c. VAT accounts for 47c of the price tag, if the bottle is priced at €2.50 in your shop, according to Revenue. So the total tax in this case comes to 84c — or about a third of the price of the bottle.

RED BULL: 20PC TAX

If you find yourself reaching for a Red Bull energy drink to offset any tiredness setting in over Christmas, bear in mind that about a fifth of the price of your can will go to the taxman.

Many energy drinks are liable for the sugar tax. As Red Bull has 11g of sugar per 100ml, this drink is hit with the highest rate of sugar tax.

Let’s say the price of a 355ml can of Red Bull in your local shop comes to €2.68. Tax accounts for 58c of that price — with VAT coming to 50c and sugar tax to 8c, according to Revenue.

TOYS: 23PC TAX

Should you be buying toys for under the Christmas tree in the coming days, almost a quarter of what you pay at the till goes straight to Revenue. The 23pc VAT rate is charged on toys. The same is true of many other Christmas gifts, such as iPhones, cameras, watches and make-up.

TURKEY AND HAM

Many of us have a turkey and ham dinner over Christmas — but if you want to avoid paying tax on these meats, eat them at home rather than in a restaurant. “If you buy turkey and ham in your local shop, they’re not liable to any VAT,” said Stewart. “However, if you buy a turkey and ham dinner in a restaurant, you pay 13.5pc VAT on the meal.”

Poultry and meat are exempt from VAT if bought in a supermarket or local shop.

However, when you eat a meal in a restaurant or cafe, 13.5pc VAT is charged on that meal — and 23pc VAT is charged on any alcohol, bottled water or soft drinks served.

CHRISTMAS TREATS

When stocking up your shopping trolley with Christmas treats in the coming weeks, being clever about the desserts and confectionery you buy could chop the tax bill you face. VAT of 23pc or 13.5pc is charged on a lot of desserts and other treats — but there are some things which are exempt from VAT.

Trifle, for example, could be exempt from VAT — depending on the type of trifle it is.

A trifle which consists of jelly, custard, cream and fruit is VAT-free; a sponge-based trifle, however, is liable for 13.5pc VAT. Most frozen desserts are liable for the 23pc VAT rate but fresh dairy desserts — such as strawberries and cream — are exempt. You don’t pay any VAT on jelly — but 23pc VAT is charged on ice-cream.

You pay 23pc VAT on chocolates, chocolate mallow tea cakes and chocolate biscuits — but the lower 13.5pc rate on chocolate-chip biscuits and biscuits that are not covered in chocolate.

You pay no VAT on chocolate spread or cooking chocolate. Even though Jaffa Cakes are partly covered in chocolate, they only attract VAT at the 13.5pc rate — because Revenue regards Jaffa Cakes as a cake rather than a biscuit.

Taking up baking will save you VAT. You don’t pay VAT on eggs, butter, sugar, flour or fresh fruit. However, you pay 13.5pc VAT on Christmas puddings, apple tarts and many other cakes.

So no matter how big your sweet tooth, or how inclined you are to splash out, be aware of the extent that stealth taxes could eat into your pocket this Christmas — and do what you can to limit that hit.