Budget 2016 – more cash for beer

Budget 2016 has to have been one of the most leaked or at the very least, most openly discussed budget in history. The media coverage over the past two weeks has proven to be remarkably accurate. This surely cannot be a shrewd tactic? Is the Government making sure that all key channels of influence were well-briefed so they could sell the message to the people ahead of time? With an election on the horizon, the Government certainly doesn’t want a repeat of the aftermath of last year’s budget. They were talking up the benefits of the budget but most of real benefits not coming into people’s pockets until the first pay-packet of 2015. However, last year’s budget was certainly positive for craft beer with the increase to excise relief.

Tax cuts will certainly boost consumer demand. Plenty of other sources will cover the tax cuts, impact of the USC, changes to entry points etc. It is worth noting that the 9% VAT rate is being retained, for at least another year.  Craft brewers will hopefully see the impact in increased sales as it is expected that some of the gains will find their way into discretionary spending. This is after tax increases, contracting income and making ends meet over the past 7 years. However, we must not overstate the impact. There’s a long way to go to redressing the damage that people have experienced in recent years.

Excise duty on alcohol has not been touched but a packet of cigarettes will go up by 50 cent per pack. As the Minister of Finance, Michael Noonan TD said “this is the only tax increase in the budget” and was taken as a “public health measure”. Does this mean that alcohol is finally being separated from the “old dependables”? I certainly hope so. Perhaps it’s an indication that the work of the producers, their supply-chain and impact right across the economy.

Of course the budget does not just benefit tax payers. The Minister for Finance said “we will need to encourage new entrepreneurs and to support existing ones”.  For those owning or setting up a craft brewery will be able to avail of an earned-income tax credit of €540 so they don’t lose out by not being a PAYE worker. The revised capital gains rate of 20% will only apply to those selling their brewery and more likely to be used in other industries. However, this may make it attractive to some to sell up at some point in the future.

Last year, I increased the amount of beer that micro-breweries could produce and still qualify for this excise relief. To further assist their development, the relief will now be available upfront thus reducing the cash-flow burden of the current rebate scheme – Michael Noonan TD, Minister for Finance

Last year, the cap on total output of craft beer eligible for excise relief was increased by 50% to 30,000 Hl.  A major problem for breweries, however, was that they had to claw-back the relief, which tied up vital cash flow. Craft breweries will now be available to claim upfront the excise duty relief. The initial scheme was introduced in Budget 2005 and the recent improvements are acknowledgement by the Government of the contribution that these breweries are making to the economy, particularly in terms of regional growth.

The tax relief reducing the standard rate of Alcohol Products Tax by 50% on beer produced in microbreweries will now be available upfront as well as through a rebate. This will assist microbreweries with their cash flow and cash position  Budget 2016

So Budget 2016 is looking good for brewers and beer drinkers. But the efforts need to continue. Promotion of entrepreneurship and start-ups should not just be confined to the tech sector. We need to be championing craft beer. We need our breweries to be considered alongside the wider maker-economy, especially in the agri-food sector. The excise duty relief needs to be competitive with schemes in other European countries. The enterprise agencies need to step up their support to existing breweries, especially with exporting, and those looking to start. Breweries need to be able to operate tap-rooms should they wish. This would boost cash-flow, further connect breweries to their localities and also benefit tourism.

The impending general election is an opportunity to highlight such these highlighted above. Nonetheless, I think we should welcome these measures announced today.

 

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