Canberra’s turn for a shout as beer tax ramps up

There comes a time with all taxes where they can reach such a high level that they seriously impact the industry in question.

Cigarettes are a great example – for health reasons we wanted to progressively ratchet up the tax on them to extreme levels to dissuade consumption and it really worked, for a while.

Now, of course, organised crime has moved into the market right under our noses and there is a thriving black market in illegally imported cigarettes for cheaper prices and an associated campaign of firebombing as the organised criminals fight it out for control of a lucrative trade.

Another industry that is really feeling the pressure of high tax rates is alcohol and in particular beer.

High inflation ramping up tax increase.

I’m old enough to remember when the front-page headline after just about every Federal Budget was “Beer, cigs up” but that changed way back in 1983 when alcohol excise duty was indexed to inflation with twice yearly rises, usually in February and August.

Now the cost of a beer in the pub or a restaurant rises inexorably and rises even faster after a period of high inflation like we have just gone through.

With huge swathes of the hospitality industry just clinging to survival after the rigours of Covid, these bi-annual price rises which percolate from brewers through to pubs, restaurants, bottle shops and other venues have become the gradual lifting of each finger for an industry at the top of a cliff.

The latest rise 0.4% on February 3 has caused the industry to beg for a freeze on excise rates, with some also calling for a review of the whole alcohol tax system, which currently taxes wine more leniently than beer and spirits.

They make some interesting points too, with Australia’s spirits tax now seven times higher than the United States with the tax on beer the third highest in the world after Finland and Norway.

Australia’s spirits industry in particular has called on the government to stop what it called a “dripping tap” of 84 successive tax increases which directs $6.2 billion of tax to the Government each year, with a forecast of an extra $800 million by 2027.

High taxes hinder production and reduce export opportunities

“That’s money out of people’s pockets who can’t afford it. Everyone knows a dripping tap should be turned off,” said Australian Hotels Association chief executive Stephen Ferguson.

Spirits & Cocktails Australia chief executive Greg Holland said the combination of higher tax and inflation had forced prices up 20% compared to before the pandemic.

He said the latest increase which took Australia’s spirits excise to $104.31 per litre of alcohol, will “make it more expensive for consumers, more expensive for producers, and less competitive for spirits exporters.”

Australian Distillers Association chief executive Paul McLeay said the excise was restricting growth in the sector’s export capabilities, pointing out that half of Australia’s 700 spirits manufacturers are in regional areas.

Chalmers watching for price gouging.

For his part Treasurer Jim Chalmers has responded by saying that he has written to the Australian Competition and Consumer Commission (ACCC) chair Gina Cass-Gottleib calling on the watchdog to monitor retailers over the month of February to ensure they don’t use the excise mark-up to inflate prices.

“We are going into bat for beer drinkers by making sure they’re not ripped off or lied to about this very small change,” he said, claiming the average price rise for a beer in a pub was less than a cent.

“Most pubs who do the right thing won’t have anything to worry about.”

Rum-bellion gathering pace.

Bundaberg Distilling chair Amanda Lampe has continued the company’s ‘rum-bellion’ campaign and said drinkers were “genuinely shocked” when they found out that $38.40 of every $61.50 1L Bundaberg bottle went to the ATO in taxes.

“I think people were genuinely shocked about the fact that 63% of the cost of it is made up in tax, said Ms Lampe.

Under the current excise formula, beer with alcohol above 3% in an individual container less than eight litres goes from $61.32 per litre to $61.57 per litre of alcohol.

In pubs the beer tax will go from $43.22 per litre of alcohol for beers over 3.5% to $43.39 a litre while a 375ml can of full-strength beer at 4.9% alcohol by volume will increase by 1c.

The difficulties being felt in the hospitality sector are more than merely anecdotal with bars, cafes, restaurants and pubs recording the highest failure rate of all industries at 8.5% according to a recent CreditorWatch report.

That compares to a 5.04% average across Australian businesses.