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.

 

Woohoo, craft beer can still sponsor what now?

In the wake of Budget 2014 with 10 cents added to the pint (before VAT being applied) and the announcement that minimum pricing is to be introduced, Government also decided to put off the banning on alcohol advertising at sporting events. Various sporting bodies and associations breathed a sigh of relief because it removed the risk of losing a valuable source of income. This will of course be of little benefit to Ireland’s craft breweries but the growth in independent breweries elsewhere have seen them encroach into the previous taboo area of mainstream  sports advertising and sponsorship.

Take for instance that the second-tier of English rugby is the Green King IPA Championship. Marston’s Pedigree is the official beer of English cricket and its English Pale Ale is a big seller at Lords. The Kent county cricket team is sponsored by Spitfire. The best craft beer sports sponsorship link-up has to involve newly arrived to Irish shores Dale’s Pale Ale from Colorado’s Oskar Blues Brewing. It holds the honour of being the very first Nascar-branded beer.

Source: www.oskarblues.com

With the Heineken Cup seemingly in disarray and a new competition structure in the offing, might we see some interesting sponsorship deals? For example, the Cork County teams being sponsored by Franciscan Well? Singha is now the official beer of the 2015 Rugby World Cup but if Ireland hosts it in 2023, will one of our existing independent breweries provide the official beer? Unlikely but I’d settle for more choice at sports venues. However, they’d limited to draft or taking a page from US craft breweries, cans. I don’t think too many Irish breweries would want to produce beers in plastic bottles (although maybe the technology will improve over time) because they’ve left that behind in the early home-brewing days.

So in short the wasn’t too much to cheer the Irish independent brewers in the Budget, except for the fact that the 9% VAT rate is retained and we have seen the growth in pairing good food and beer. Also, there were positive measures introduced to support entrepreneurs such as changes to the Employment and Investment Incentive Scheme and Capital Gains Tax. The ‘Start Your Own Business’ scheme grants a two-year exemption from income tax to founders  who have been receiving social welfare for fifteen months or more (up to a limit of €40,000). This could be an opportunity for Beer Ireland and the Taste 4 Success Skillnet to really make a difference because those already on the live register availing of their courses/network could be really encouraged to go out and start their own brewery. Let’s hope these measures work.