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Ross' hopes for cheaper non-alcoholic booze nixed after Donohoe says 'no plans' to reduce tax

The minister for finance said reducing VAT on non-alcoholic beverages would be “difficult to administer”.

Image: Shutterstock/wavebreakmedia

THE GOVERNMENT HAS no plans to introduce a lower VAT rate that would reduce the cost of non-alcoholic beer, despite Shane Ross’ desire to slash prices as part of his road safety campaign.

Minister for Finance Paschal Donohoe has said he doesn’t intend to reduce the cost of non-alcoholic beer through taxation, and that any attempts to do so would be “difficult” to implement and provide “considerable scope” for tax avoidance.

Transport Minister Shane Ross had told the Sunday Independent that he would try to put the pressure on Donohoe to examine ways of lowering the cost of alcohol-free beer. 

“On the surface it beggars belief that non-alcoholic drink is more expensive than equivalent alcoholic products,” he told the paper. “We should be incentivising customers who want to enjoy a few alcohol-free beers.”

There have been a growing number of alcohol-free beer options on the market in recent years, with major players in the market like Heineken and Guinness offering non-alcoholic options, and retailers reporting growth in sales.

Its cost varies by pub, but it’s not uncommon for non-alcoholic drinks to be similarly priced to the other beers and ciders on tap.

Non-alcoholic beer is not subject to excise duty which, on a regular pint of beer, is around 54 cent.

It is, however, subject to VAT of 23%.

On 5 February, Paschal Donohoe responded to a parliamentary question from Fianna Fáil TD Michael McGrath saying that were “no means under EU VAT law to apply a lower VAT rate to the supply of non-alcoholic beer”.

However, just a few weeks later, the minister for finance has said this information was incorrect.

“The position is that it is may be possible under Annex III of the VAT Directive for a reduced rate to be applied to non-alcoholic beverages,” he said.

Despite it being possible, Donohoe poured cold water on the idea it could be happening any time soon, and saying any such system specifically targeting beer would be difficult to implement.

“I have no plans to reduce the VAT rate on non-alcoholic beverages,” he said. “The majority of drinks, including soft drinks and bottled water, are charged to VAT at the 23% standard VAT rate in Ireland.

Applying a reduced VAT rate to non-alcoholic beer and wine would necessarily involve the application of different VAT rates to supplies of non-alcoholic beverages. This would be difficult to administer and would be likely to provide considerable scope for manipulation of the VAT system and potential opportunities for tax avoidance.

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Sean Murray

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