DSICA: Let’s simplify alcohol taxation

22 January, 2018 by Andy Young

This column was submitted by Distilled Spirits Industry Council of Australia CEO, Alec Wagstaff, in the December issue of National Liquor News.

Australians often hear about the complex web of regulation business face and how the extra costs involved slow growth and job creation. The drinks industry suffers more from most from this heavy regulation by all levels of government. Despite regular talk about removing red tape precious little happens. Things are getting worse not better.

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Part of the problem lies in a reluctance to tackle big issues. Instead of fundamental reform we see bolt on solutions leading to a Frankenstein like outcome – possibly well intended but with an appalling outcome.

We are now seeing what happens when one part of government neglects to address longstanding policy failure. Despite numerous reports to Governments of both political persuasions recommending simplification and rationalisation of alcohol taxation in Australia, nothing of substance has happened. Regular indexation compounds the policy failure and the resultant outcome distorts the marketplace.

Spirits and premium wine drinkers suffer most under the current regime whilst low cost wine and cider effectively get a leg up from the tax collector in the marketplace.

The facts speak for themselves – a cask wine drinker pays 5c tax on a standard drink and a Bundy drinker pays $1.06. A flavoured cider drinker pays $1.06 whilst mass produced apple cider attracts only around 20c in tax.

The recent NT Liquor Review recommended the NT Government push for alcohol tax reform but probably with one eye on the history of inaction suggested a minimum unit price of $1.50 per standard drink. This idea is now also gaining some traction in WA.

This is an example of an ad hoc measure filling the vacuum created by the lack of proper reform.

We can only hope that the Federal Government and the Opposition take seriously the landmark Productivity Commission Report released in October and the draft Senate Red Tape Enquiry both of which recommended the Australian Government should move towards an alcohol tax system that removes the current distortions.

If they do, Australia might be saved from a series of yet another band aid solution which does little to encourage better drinking or the development of a vibrant export focused local industry.

Understandably those who benefit from the current system will continue to oppose any reform. They will create doomsday scenarios ignoring the real opportunity for sensible reform which allows time for industries to adapt and prosper.

As we leave the political turmoil of 2017 we can only hope for a more constructive policy environment in 2018.