Growing industry calls to Irish Government for VAT supplement hike rethink

By Will Chu

- Last updated on GMT

Growing dislike for Ireland’s plans to tax vitamins, minerals, probiotics and fish oils continued this week as the country’s largest retail industry body called on the Government to review the VAT hike.

Retail Excellence, one of Ireland’s largest industry representatives echoed calls by the Irish Health Trade Association (IHTA) and the Irish Pharmacy Union to rethink the 23% VAT rate due to take effect from March 1.

“Retail Excellence has been working on this with, and on behalf of our members across the country since we first became aware of the issue late last year,”​ said group CEO of Retail Excellence, David Fitzsimons.

“This move will have a huge knock-on effect for retailers, pharmacies and particularly small, independent, family run stores who have been the mainstay of high streets up and down the country for decades.”

Fitzsimmons added the shock of a 23% VAT hike on these products may well cause hundreds of job losses across Ireland at a time when the impact of a no-deal Brexit on the Irish economy was all the more real.

These fears were fuelled by a recent Irish Health Trade Association (IHTA) survey in which it revealed many of its members might have to make staff redundant or close some outlets after March 1.

The Association’s survey pointed to the VAT hike as a threat to the livelihood of 250 local firms with 1,800 jobs at risk.

IHTA pressure

The IHTA are in the midst of actions designed to change finance minister Paschal O’Donohoe’s mind especially as he recently stated of his willingness to engage with stakeholders on the matter.

As well as an online petition asking for support in stopping the proposed levy, the IHTA was also urging consumers to contact their MPs and ask for their support in this consumer health initiative.

The Assocation claimed that in December of last year the Revenue Commissioners asked the Minister to apply a reduced rate of VAT on all food supplements in the Budget.

However, the Minister decided to take advice on the matter before potentially legislating in the next year’s Budget.

The IHTA added that the Revenue Commissioners took the decision and pressed ahead with the standard rate of VAT (23%) on all food supplements from the 1st of March.

“The Health Product Industry considers it unacceptable for any institution of the State to take unilateral action of this nature when the Government has stated that it is considering legislation on a matter,”​ the IHTA said.

“The industry is calling on the Revenue Commissioners and the Government to defer this decision to allow the Government to legislate as it deems appropriate.”

Revenue Commission stance

The Revenue Commission defended its actions in late 2018​, arguing that some traders were “exploiting”​ the concession by applying it to products that should be paying the standard rate.

It added, “The operation of the current concession has become extremely problematic, because of efforts by elements in the industry to exploit the concession to extend zero rating way beyond the scope permitted by Revenue.

“These elements consistently challenge Revenue guidance and Revenue decisions on the VAT rating of products, and Revenue is very concerned that this action is resulting in confusion and inconsistency generally in the sector, with compliant businesses applying correct VAT rates to their product ranges, while others apply the zero rate to products that are liable to the standard rate.”

The IHTA  also called on the Government to ensure that whatever steps they took would recognise the legal status of food supplements as foods under EU law, would “involve appropriate consultation with the industry, and most importantly will respect the choices that consumers make when using food supplements to manage their health”.

‘Maintain and improve adult health’

An iReach survey commissioned by the trade association, IHTA in 2018 found 71% of Irish consumers purchased vitamin, mineral and other food supplements all year round, with 73% of those regular consumers doing so to ‘’maintain and improve ongoing adult health.”

“Elderly consumers rely on products such as Vitamin D, glucosamine sulphate tablets and Omega 3 fish oils for the maintenance of normal muscle and bone function, the normal function of their immune system as well as joint flexibility and this increase may be a step too far for many,” ​said Retail Excellence.

“Indeed, this move would act as counter-productive to the Government’s own Healthy Ireland Initiative launched in 2013 which states that ‘wellbeing is valued and supported at every level of society’.”

The government’s proposals are a repeat of 2014 plans in which authorities threatened to place a 23% VAT levy herbal teas as well as health supplements.

However, the Irish Association of Health Stores (IAHS) told members in June of that year that the higher VAT rate would not apply to herbal teas due in part to “industry lobbying”.​

“We have been here before with herbal teas with the same arguments. In that case the Government backed down from applying VAT,​” ​said tax advisor Ciaran Hurley.

“Health food retailers say that their customers will see it to be more a case of the government looking for yet another easy way to tax the consumers pocket and they will vehemently resist this move.”​

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