OLIVE Finn of the Olive Branch Health-food store in Clonakilty has just served one of her regular customers: a man who has suffered from long-term depression and who has relied on a food supplement to help wean himself off the prescription medications whose side-effects were, he says, intolerable.
Now, he and all other consumers in Ireland that use food supplements, vitamins and minerals to help manage their health are due to be hit with a VAT hike from 0% to 23%. The new tax will take effect from March 1, 2019.
Olive and other independent Cork health-food shop owners are now warning of serious consequences to their customers’ health and to their businesses as consumers face prices hiked by nearly a quarter on lines of products which have had a 0% rate for 40 years.
“Why are we taxing health? It’s almost like a punishment,” Olive says. “All our customers are horrified.”
She feels the price increase will impact on her customers’ ability to afford their regular dietary supplements, and that those who rely on them, such as the gentleman she has just served, could face negative health impacts as a result.
“What’s going to happen to him?” she says. “Will he be driven back to the healthcare system?”
Olive and others believe the 23% rate will also devastate smaller stores, whose sales of vitamins and supplements can account for over 50% of trade, according to trade organisation Health Stores Ireland, which represents 200 independent health-food shops in Ireland.
“This rate is a deterrent and it’s coming from a Government that only cares about big business,” Olive says, the frustration in her voice clear.
“They have no understanding of our business. This will hit the small, independent businesses that are at the heart of our lovely small communities.”
Con Murphy is the manager of the Quay Co-op in Carrigaline, Cork’s oldest health-food shop which now has outlets in the city centre, Ballincollig and Carrigaline.
Con says the Quay Co-op’s position as Cork’s largest independent store could immunise the business to a degree, but that his concerns are for the health of his customers, as well as for the future of smaller stores in rural areas.
He especially objects to the highest rate.
“They could have argued for 9% or 13.5% across the board, but 23%? They’re classing our health as a luxury,” he says.
“This will push supplements over the edge into unaffordability for a lot of people and will definitely close smaller stores.”
Irene O’Connell is co-manager of Natural Choice in Paul Street Shopping centre, which employs eight full and part-time staff. Irene estimates that over a third of the shop’s business is in vitamins and supplements. She says her customers are “disgusted. They’re signing the petitions.”
As well as concerns around the quality control if customers start to purchase supplements online to avoid the tax, Irene says a move online takes away “the local shop and the warmth, knowledge and personal advice and sympathetic ear of coming into the shop.”
Irene says there’s real frustration amongst customers and staff about the perception of supplements as non-essential, or as luxury items.
“Supplements like fish oil, magnesium and vitamins are not quackery,” she says.
“They have real benefits and are not replaceable with pharmaceuticals. People with chronic inflammatory disease or autoimmune conditions genuinely are helping to maintain their health with these supplements.”
At stores in Cork city and county, a petition is being collected to ask for a stay on the VAT rate. Alan McGrath, a spokesman for Health Stores Ireland (HSI), says more than 32,000 signatures have been collected to date, both in-store and online at www.stopthisvat.ie.
Eleven of the HSI’s 200 members said the VAT hike could cause their stores to close, while 15 said they’d be forced to let staff go to cope with the downturn, in a survey Alan conducted. Just under 80% of respondents said they’d keep going, but on a much lower return.
Alan says the VAT hike has come about for the convenience of Revenue and is an attempt to standardise a difficult area to regulate, rather than any specific need for such a high rate on supplements.
“It’s not reasonable to deliver a hammer-blow to consumers and retailers just to regularise procedure for Revenue,” he says. “This landed as a bolt from the blue. There was some consultation with the supplier group, but essentially this is a dictat from Revenue.
“The sector who will be hardest hit are the most vulnerable: ageing people who are helping their own health in areas like macular degeneration, joint mobility and nutrition. It’s wrong.”
Alan says customers could be driven to avoid the VAT rate by buying supplements from websites and that there are very real fears for the quality control and safety of online purchases.
“You have to question the quality of products from some of the big online discounters,” he said. The VAT hike will apply across the board to all food supplements, apart from classified “human oral medicines” with Health Products Regulatory Association licences, including folic acid, will continue to apply 0% VAT.
A statement from Finance Minister Paschal Donohoe says he has promised to review the situation.
“I am conscious of the difficulties posed by this VAT change on individual consumers of food supplements.
“It is for this reason that I announced my intention to put in place a process that will examine some of the policy choices around the VAT treatment of food supplements, concluding in the 2019 Tax Strategy Group Paper.”