STEALTH TAX Q&A

÷ HOW TO SAVE ON VAT AND EXCISE DUTY?

The simplest way to save is to reduce your expenditure — or to buy items which are exempt from these taxes, or which attract a low tax rate. You may be able to save on tax if you order something from an EU country which has a lower VAT rate than Ireland — though there are rules in place to prevent individuals from attempting to save in this way. “A business in another EU country which sells goods to consumers in Ireland has to charge Irish VAT where its sales to Irish consumers exceed €35,000 in a calendar year,” said John Stewart of Deloitte. “Where goods with a value greater than €22 are bought from suppliers outside the EU, import VAT will be payable — generally at 23pc. The consumer may also have to pay customs duty. This can be a hidden cost for consumers as it is not included in the price charged by the supplier, but is collected by the person that delivers the goods.” Goods arriving from another EU country can be liable to additional charges, such as excise duty and VAT. “For example, the excise duty and VAT on an average case of 12 bottles of wine, originating in another EU country, could add up to €61.78 to your purchase price,” said a Revenue spokesman. ÷ HOW ARE THESE TAXES TOTTED UP?

The excise duty paid on alcohol depends on the type of alcohol it is, and the quantity in the product. The amount of excise paid on cigarettes largely depends on the volume sold. The excise paid on cigars depends on the weight of the product. Alcoholic drinks, cigarettes and cigars are liable for the top 23pc VAT rate. VAT is charged as a percentage of the selling value of a product and so, as the price of the product rises, so does the VAT paid. Furthermore, VAT is charged on excise duty. ÷ HOW DOES IRELAND’S EXCISE DUTY COMPARE? Ireland has the highest excise duty on wine in the EU, the second-highest excise on beer and the third-highest excise on spirits, according to a report from the Drinks Industry Group of Ireland last September. The excise duty on beer, cider, spirits and wine was increased twice during the recession. “These [last two excise duty increases] were recessionary taxes,” said Patricia Callan, director of Drinks Ireland, which represents alcohol drinks manufacturers and suppliers. “Since the recession ended, there have been income tax cuts and moves to restore public sector pay. However, there has been no change on alcohol excise duty. The Government is hoping that people are forgetting about stealth taxes.” There are some concerns that cuts in excise duty could lead to an increase in alcohol consumption and binge drinking in Ireland — though for those of us who drink responsibly, high alcohol taxes are simply a financial burden.