Key industry stakeholders have hit out at the recent increase to the excise tax on beer and spirits.
The consumer price index for the June quarter has revealed the Federal Government has raised the excise on beer and spirits to more than $103 per litre.
The tax applies to various drinks including beer, spirits, and some pre-mixed beverages, and different categories have their own rates.
For example, beer is taxed per litre of alcohol, with rates varying between commercial and craft beers, while spirits are taxed per litre of pure alcohol, typically at a higher rate due to their stronger alcohol content; and ready-to-drink beverages also face excise tax.
Manufacturers and importers are responsible for paying this tax to the Australian Taxation Office before the products hit the shelves.
The excise tax has several purposes, from generating significant revenue for the government, to helping reduce alcohol-related harm, and influencing the pricing and availability of alcoholic beverages in the market.
The latest tax hike now means that Australia has the third highest alcohol tax in the world, behind Norway and Finland, making up anywhere from 14 to 37 per cent of the cost of the product.
This is now the 75th tax rise on spirits since then Prime Minister Paul Keating introduced the automatic indexation in 1983, while treasurer.
The alcohol excise tax was designed to adjust automatically with inflation, aiming to maintain its real value over time.
However, the system’s frequent rate adjustments have led to substantial increases in recent years.
Spirits & Cocktails Australia chief executive, Greg Holland, said he believes the latest tax hike went against what Keating originally ‘intended’.
“Automatic indexation was introduced to suit the economic conditions of the day, it was never intended to continue indefinitely,” he said.
“The spirits tax has now increased by almost 20 per cent in the last four years.
“Far from providing stability, the Australian spirits industry is now suffering from an extremely unstable investment environment, thanks to these tax hikes every six months.”
The Brewers Association of Australia also called out the automatic indexation with beer drinkers hit with a 2.2 per cent price rise over the past six months.
“A 10 per cent increase in the beer tax since last year just shows that these tax hikes are becoming out of control,” said Brewers Association CEO, John Preston.
“We don’t believe these increases are now actually raising any more money for the Government. They are just hurting beer drinkers and our pubs and clubs.
“While the Treasurer inherited these automatic half-yearly beer tax increases, we’re calling on the Government to step in and take some action before a trip to the pub or a dinner out with the family becomes an unaffordable luxury for most Australians.”
The latest increase will mean beer drinkers will pay a $20 beer tax for a slab of full-strength beer.
The Australian Distillers Association also released a statement regarding the excise.
Australian Distillers Association chief executive Paul McLeay said there are now more than 700 distilleries in this country making world-class spirits, and their prospects depend on urgent intervention by the Federal Government.
“The continued Government inaction on this issue is incredibly frustrating for our industry, which already contributes $15.5 billion in added value to the Australian economy and supports more than 100,000 jobs,” he said.
“We know that our economic potential could be much greater. Analysis from Mandala Partners has demonstrated that spirits manufacturing can be a $1 billion export industry for Australia by 2035, but only if we have the right policy settings.
“The Federal Government must act now by freezing the spirits tax and partnering with industry to create an export body for spirits, just as it has done so successfully with Wine Australia over recent decades.”
Craig Michael, director of Bellarine Distillery in Drysdale, Victoria said the tax is now $25 per litre higher than when the company began operations in 2015.
“These six-monthly increases are becoming increasingly difficult for our business to sustain, and they are impossible to plan for,” he said.
“How can we accurately undertake financial modelling and make business decisions if we don’t know what tax rate, we will be paying in six months’ time?”
A recent Federal Budget statement states that the indexation of excise rates is aimed at helping maintain the value of the tax over time but recognises the need for balance.