This week saw spirits tax in Australia, already third highest in the world, increase once again as yet another six-month indexation to CPI kicked in, and the country’s distillers are saying enough is enough, this is going to ruin a growing industry.
The latest hike sees a new tax rate of $101.85 per litre of alcohol and as the Chief Executive of the Australian Distillers Association (ADA), Paul McLeay, says Australia’s craft spirits industry is united in calling for urgent tax reform.
“There are now more than 600 distilleries across Australia, half of which are located in regional areas,” he said.
“Their future is increasingly being jeopardised by these relentless six-monthly tax increases.
“We say to the Government: enough is enough. Freeze spirits tax at its current rate for two years so that we can work together on developing sustainable policy settings for our industry.”
This week’s increase means that spirits tax has increased by 16 per cent over the last three years and Spirits & Cocktails Australia chief executive Greg Holland said this is too much for everyone in the current inflationary environment.
“This tax is clearly unstainable for spirits manufacturers, their trade customers, and consumers who are already struggling with the cost of living,” he said.
“We call on the Government once again to freeze this tax at its current rate for two years.
“This temporary measure will take the pressure off our industry and help the Government accomplish its mission of bringing inflation back under control.”
UNITED UNDER STRESS
Three successful Australia distilleries have come together to highlight the impact the tax hikes have on their business, and why the Government should be doing more to help grow this important Australian category.
Cape Byron Distillery founder Eddie Brook said small distilleries are unable to pass the tax hikes on to trade and consumers in the current economic environment.
“And we don’t have the economies of scale, nor are we growing quick enough to absorb these ongoing costs,” he said.
“As a result, these six-monthly increases really do have the effect of reducing margin in our business at a time when we are already experiencing cost increases across the board, and economic conditions are impacting consumer demand and spend choices.
“It’s getting to the point that it is putting such stress on the industry.”
When David Vitale founded Starward Whisky in 2007 the tax rate was around $64.
“Here we are 17 years later and we’ll be paying $101.85,” he said.
“Start-up businesses have a fixed amount of capital available to scale and grow, and every six months that’s compromised by the government giving themselves a pay rise.
“Every dollar increase in excise is a dollar less that we have to invest in scaling our businesses.
“Our sights have to be set on export markets because it’s simply uncompetitive to operate here in Australia.”
Last year Never Never Distilling Co was forced to retrench several employees and Co-Founder George Georgiadis said the latest tax increase in the tough economic conditions that distillers face in 2024, will put even more pressure on the size of Never Never’s workforce.
“Our margins are already being squeezed as input costs are going up across the board,” he said.
“Meanwhile, revenue is down because consumers have cut their spending on premium Australian spirits.
“We’re already struggling to make that work and then we get slugged every six months with tax increases that are not only swallowing up more margin, but making our products proportionately more expensive to beer and wine again.”
In an interview last week Prime Minister Anthony Albanese was asked if the Government was considering pausing spirits excise, he replied: “We are not looking at that at the moment, but obviously in the lead up to budgets, you have submissions and I’m sure that there’ll be submissions along a whole range of ways.
“One of the things that we have to do though, is look at ways where we provide cost of living support, whilst putting downward pressure on inflation.”
With jobs and businesses on the line the Government should also look at ways to ease the pressure on Australia’s distilling industry, widely recognised as being among the best in the world.