Tax changes may spell the downfall of the alcohol industry.
With the federal budget looming and the ongoing debate about taxation on alcohol, industry analysts at IBISWorld have compiled a comprehensive analysis on the current performance of alcoholic beverages and what the switch to a flat volumetric tax might mean for the industry.
“An equal 10 per cent increase in tax across all alcoholic beverages, combined with a shift to tax wine on a volumetric basis, would result in a decline in total alcohol consumption of 9.4 per cent, and raise $2.9 billion annually,” said Andrew Ledovskikh, IBISWorld Senior Industry Analyst.
Currently, the taxation system for alcohol is quite complicated, with IBISWorld Analysts finding that various tax rates are applicable to alcoholic beverages across 16 different excise categories in Australia.
“Beer and spirits are taxed on an excise system, with rates of taxation varying by the type and strength of the product,” said Ledovskikh.
“However, all wine, as well as traditional cider, is taxed based on its wholesale value.”
According to the analyst, the most common proposal is for a flat volumetric tax on all alcoholic beverages. This tax would most likely be $36.50 per litre of alcohol, which is similar to the excise rate on full-strength packaged beer.
Ledovskikh also believes that changes to the excise tax regime will be fuelled by the senate inquiry into the winemaking and grape growing industries.
“If such a change were introduced, it would have significant consequences for the alcohol manufacturing sector,” he said.
IBISWorld analysts anticipate that the new taxation rate would lead to an increase in the price of bulk wine, draught beer and unflavoured cider without added alcohol or sugar, assuming the Wine Equalisation Tax is abolished.