Government forecasting lower alcohol tax revenue

16 October, 2020 by Andy Young

The Federal Government is forecasting significantly lower revenue from alcohol taxes over the next two years, as the COVID-19 pandemic sees alcohol consumption reduce in Australia.

Despite claims that the pandemic has seen Australians drinking more, revenues from beer and wine are expected to decline both this year and next year.

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According to Alcohol Beverages Australia (ABA), tax receipts from wine tax are facing an eight per cent decline in 20-21 before a 15 per cent drop in 21-22.  Revenue from beer excise is also set to be hard hit, set to fall four per cent in 20-21 followed by a 10 per cent drop in 21-22.

Spirits are expected to be less affected than other parts of the alcohol sector, with tax receipts expected to increase from MYEFO by 3.5 per cent in FY21 before a modest decline of 1.5 per cent in FY22. Revenue from spirits tax is expected to be above pre-pandemic levels in FY23 and beyond.

The ABA said that overall the Government is budgeting to receive $670m less in alcohol taxes over the next two years than when MYEFO was released in December last year, with alcohol tax revenues not expected to return to pre-pandemic levels until 23-24.

The budgeted fall in alcohol tax reflects reduced alcohol consumption by Australians from a combination of venue closures, social distancing requirements and reduced household incomes, while also highlighting the on-premise losses have not been made up for by an increase in off-premise sales.

Andrew Wilsmore, CEO Alcohol Beverages Australia, said: “Those scenes of long queues when Australians feared bottleshops could be closed created a perception that we were all drinking to excess at home but the reality, confirmed by Treasury, is that Australians continued to drink in moderation. What’s hurt most are the restrictions on gatherings, events and the closure of hospitality and tourism venues which has impacted both business and government revenues.

“With tax making up a third to nearly half of the price of a bottle of wine, beer or spirits – some of the highest rates in the OECD – now is the time for Government to examine the affordability of a drink to help lower the price of a night out and get people back into bars and restaurants and quickly create jobs.”

The ABA is far from celebrating this outcome as the association says it highlights the devastating impact of the pandemic on Australian businesses.

Over this financial year total alcohol taxes are expected to be $7.23bn, down 1.36 per cent from the $7.33bn forecast in December 2019 latest MYEFO. In FY22 a sharper fall is expected, with the total tax take of $7.0bn being 7.36 per cent lower than the $7.57b forecast in MYEFO.

Alcohol tax revenue is forecast to return to roughly pre-pandemic levels in FY23, with growth continuing in FY24.