Ireland's alcoholic drinks industry has welcomed the Government's plan to cut duty tax on drinks by 20%, as outlined in its 2010 Budget announcement.

Republic of Ireland finance minister Brian Lenihan has announced the widespread cuts in drinks duty to stem a loss of revenue caused by consumers travelling to buy cheaper drinks in Northern Ireland.

Duty will fall by EUR0.12 (US$0.18) on pints of beer and cider, by EUR0.14 per half glass of spirits and by EUR0.6 on a standard bottle of wine.

A 0.5% rise in value added tax (VAT) will be also be reversed, said Lenihan in his Budget Speech today (9 December).

All of Ireland's drinks trade bodies, faced with falling domestic sales and sector job losses, have lobbied hard for the Government to cut duty. Their lobbying came despite Ireland facing a heavy deficit amid one of the worst economic periods in its history.

"The Drinks Industry Group of Ireland (Digi) wholeheartedly welcomes the minister's announcement," said Digi chairman Kieran Tobin.

"With alcohol a key driver of cross-border trade, this announcement will change recent patterns of cross-border shopping and will provide a real stimulus to the wider economy by encouraging people to shop and socialise locally."

Ireland has the second highest excise tax on spirits among the EU's 27 member states, according to trade body the European Spirits Organisation (CEPS).

Currency depreciation between the euro and sterling is the main catalyst for cross-border shopping with Northern Ireland, finance minister Lenihan said today.

"This is outside of our control. But it is within our power to reduce our consumption taxes which are among the highest in the EU," he said.

But, he warned the drinks trade: "I expect the drinks industry to play its part in making the cost of alcohol more competitive. If I find this reduction has not been passed on to the consumer I will reverse today's reduction."

Government revenue from spirits fell by more than a quarter in the first nine months of 2009, the Irish Spirits Association said earlier this week.

Ireland's drinks trade will be further boosted by news today that VAT is to return to a rate of 17.5% in the UK, which includes Northern Ireland.