Government’s tax inaction hurts the whole industry

Spirits tax in Australia rises again today, to $103.89, hitting the whole industry and consumers with businesses and people already struggling with cost-of-living increases and other economic headwinds.

Australia’s spirits tax is already the world’s third highest, having risen by more than 20 per cent since the onset of the pandemic and has been increased 75 times since Paul Keating introduced automatic indexation in his first Budget as Treasurer in 1983.

When Keating introduced the policy Australia had two distilleries, there are now more than 700 and Australian Distillers Association chief executive Paul McLeay said and their prospects depend on urgent intervention by the Federal Government.

“The continued Government inaction on this issue is incredibly frustrating for our industry, which already contributes $15.5bn in added value to the Australian economy and supports more than 100,000 jobs,” he said.

“We know that our economic potential could be much greater. Analysis from Mandala Partners has demonstrated that spirits manufacturing can be a $1bn export industry for Australia by 2035, but only if we have the right policy settings.

“The Federal Government must act now by freezing the spirits tax and partnering with industry to create an export body for spirits, just as it has done so successfully with Wine Australia over recent decades.”

Tax hikes hurt small business

Craig Michael, director of Bellarine Distillery in Drysdale, Victoria, said the tax is now $25 per litre higher than when the company began operations in 2015.

“These six-monthly increases are becoming increasingly difficult for our business to sustain, and they are impossible to plan for,” he said.

“How can we accurately undertake financial modelling and make business decisions if we don’t know what tax rate we will be paying in six months’ time?”

Bars join the fight

Night Time Industries Association CEO Mick Gibb said the dreaded six-monthly tax increases are yet another impost on struggling hospitality venues.

“Every time the tax increases, the bar owner has to pay more for the tequila in that margarita, the gin in that martini or the vodka with that soda,” he said.

“Sometimes venues have no choice but to pass on these costs by increasing their prices. That ends up hitting the hip pockets of everyday punters who then say, ‘I’d love to go out more, but I just can’t afford it’.”

Gibb said the tax increase compounds the existing inflationary pressures impacting venues, such as rent, electricity, freight and insurance.

“But in contrast to those unavoidable cost increases, these six-monthly tax hikes are completely at the Federal Government’s discretion,” he said.

“Freezing the tax is a sensible measure to ease the pressure on venues and consumers, and will also help the Government achieve its goal of reducing inflation.”

Spirits & Cocktails Australia Chief Executive Greg Holland says the latest tax increase simply cannot be justified in the current economic circumstances.

“Enjoying a drink with friends is one of life’s few simple pleasures for Australians who are currently struggling with the cost of living,” he says.

“Sadly, this custom is increasingly being priced out of reach for many people, thanks to relentless alcohol tax hikes every six months.”