Alcohol Tax: The Winners and Losers

By Andrew Starke

The Henry Review will recommend that the federal government adopt a single, flat tax across the alcoholic beverage industry, according to a leaked report.

While simplifying the taxation system, the proposal would create clear winners and losers with wine and mid-strength beer increasing in price and RTDs and spirits likely to become cheaper.

This is based on reports that the new taxation system will base its single volumetric tax for all alcohol on the packaged full-strength beer rate of $41.68 per litre of pure alcohol.

It is expected that this flat tax would be phased in over a period of time, replacing the convoluted system presently in operation.

While the RTD and spirits categories could be spared as much as $135 million in tax annually, giant beer producers like the Foster’s Group and Lion Nathan, small craft beer producers and the wine industry would be hardest hit.

“Speculation on what will or won’t be in the Henry Tax review seems to have become a national sport, we’ll hold our judgement for the meantime,” Foster’s communications manager, Troy Hey, told TheShout.

“That said, the ability to apply excise rates to different categories of alcohol based on public policy, consumption patterns or community concerns, seems a pretty fundamental one to retain.”

A Lion Nathan spokesperson declined to comment.

Winemakers have cautioned the federal government that unnecessary tax changes could devastate their industry.

In its formal Pre-Budget Submission lodged earlier this week, the Winemakers’ Federation of Australia (WFA) called on the treasurer to retain the Wine Equalisation Tax (WET) as ‘the most appropriate system for taxing wine’.

“Suggestions that all alcohol should be taxed in the same way ignore the reality that wine is different from other forms of alcohol in the way it is produced, marketed and consumed,” WFA’s CEO, Stephen Strachan, said.

“An ad valorem tax is the fairest way to tax wine and the WET was developed and introduced to reflect the realities of the wine industry. That situation has not changed.

“What has changed, however, is that the wine sector is dealing with its toughest conditions in more than two decades. Imposition of tax change at this time would be a double whammy as it would amplify the slow and painful restructuring the sector is undertaking.”

Strachan said WFA modelling showed that a volumetric tax at the same rate as applies to packaged beer would see 95 percent of wine increase in prices, sales volumes fall by 34 percent, 29,000 hectares of vineyard become redundant and more than 12,000 jobs lost.

[Wed 03/02/2010 11:49:32]