Following the latest consumer price index (CPI) release, the federal government confirms the excise on beer and spirits will increase from today (5 August). Industry bodies condemn the rise to more than $103 per litre, saying it is causing damage to the spirits industry and to craft brewers across the country.
Australia now has the world's third-highest alcohol tax after Norway and Finland. Alcohol excise represents around 14-37 per cent of the price paid for wine and beer, and half of the price of spirits, and goes up twice a year based on the movement of the consumer price index (CPI).
The Federal Government confirmed that the spirits tax would be increased from $101.85 to $103.89 per litre, effective as of 5 August. It will be the 75th tax hike on spirits since automatic indexation was introduced by Paul Keating in August 1983, in his first budget as Treasurer.
Spirits & Cocktails Australia chief executive, Greg Holland, said that the impending tax increase simply cannot be justified in the current economic circumstances.
“It is now abundantly clear that the automatic indexation of excise to CPI has outlived its usefulness as a revenue-raising measure,” said Holland.
“The Federal Government’s own data has repeatedly demonstrated that rising alcohol excise is contributing to the stubborn inflation problem that it is trying so hard to address. Meanwhile, our hospitality sector is on its knees. Another tax increase will only increase the cost burden on struggling venues.
“The Government has repeatedly been forced to downgrade its spirits excise revenue forecasts, suggesting we have already reached the limit of what consumers are prepared to pay for spirits,” he said.
The decision to continue raising the tax amidst calls from industry to freeze excise indexation has impacted the industry, particularly for craft breweries.
According to KPMG data, the ~700 Australian craft brewers contribute an annual $1.93 billion to the economy, with a market worth $160 million. The industry has grown by over 80 per cent in the last eight years, and while independent brewers make only seven per cent of Australia’s beer, the industry directly employs 10,000 people, or 51 per cent of the entire brewing workforce.
However, at least 20 craft breweries have closed in the past year, with more on the brink of collapse – and even global companies like Lion are having to close breweries.
Australia also has more than 500 craft spirit distilleries producing whisky, gin, vodka, rum and other spirits, and over 2400 wineries in 65 wine regions around the country.
There were only two distilleries in Australia when the six-monthly tax hikes began in 1983, with industry saying that the excise does not represent the current economic conditions or the evolution of Australia’s alcohol industry over the past 41 years.
Australian Distillers Association chief executive, Paul McLeay, said that the current excise regime is at odds with the Government’s objectives of boosting domestic manufacturing and trade.
“The Government has allocated $22.7 billion over the next decade to its Future Made In Australia policy, which we are fully supportive of. However, we hope these lofty ambitions will not be at the expense of quicker wins in developing manufacturing sectors with strong growth prospects, such as distilling,” said McLeay.
“We are calling for the spirits tax to be frozen at its current rate for two years. This would have a comparatively modest budgetary impact in the context of the Government’s domestic manufacturing agenda.”
“This would provide the stability for a broader review of spirits excise settings, so we can create the right conditions to attract capital investment, scale up manufacturing capabilities and grow exports,” he said.
