With a federal election this year, it's not surprising to see the Prime Minister and Treasurer effectively jettisoning some of the most important but potentially contentious recommendations in the Henry review, says Diageo MD, Tim Salt, in Friday’s (May 7) The Australian newspaper.
“In seeking a politically safe outcome, the federal government has ensured the existing tax system on alcohol remains in place for the foreseeable future. Not surprising, but disappointing. And wrong.
The problem is the system discriminates between different types of alcohol products, taxing them according to whether they are brewed, distilled or made from grapes, rather than the amount of alcohol they contain.
Wine is taxed under the Wine Equalisation Tax, which means it is taxed based on its value, as opposed to volume of alcohol. Cask wine is taxed at about 4c per standard drink, while beer is taxed at about 37c per standard drink. Spirits and spirit-based ready-to-drink, dismissively described as "alco-pops", are taxed at about 93c per standard drink.
This is a situation that simply makes no sense. This is not just bad for the spirits industry, it is also bad for consumers, who ultimately pay the tax. Why should they pay so much more to enjoy one form of alcohol over another?
It is also inconsistent with the health and social outcomes the government says it wants to achieve to address alcohol-related harm in the community. These are outcomes many of us in the industry support. But no one could support the notion alcohol-related harm is confined to either drinkers of spirits, drinkers of wine, or drinkers of beer. Yet this is the assumption that seems to underpin the tax system.
The members of the Henry review clearly recognised the inequities of the existing alcohol tax system, which is why they recommended a complete overhaul and the early implementation of volumetric tax a position we fully support.
In removing the distinction between different manufacturing processes, the review rightly points out volumetric tax would be better suited to helping reduce social harm, and would also slash the compliance and administration cost of the existing tax system.
As the main spirits producer in Australia, it is easy to assume we are driven solely by our commercial interests. Of course, we are a business. And we believe spirits are being taxed disproportionately high compared to other alcohol categories. But volumetric tax would bring beer, wine and spirits to a more level playing field. After all, alcohol is alcohol.
The Treasurer's decision to park the Henry proposal has not only perplexed alcohol producers such as Diageo. It has also disappointed those in the health advocacy area who see the benefits of a volumetric approach for reducing harm.
The Alcohol and Other Drugs Council of Australia and the National Alliance for Action on Alcohol have both expressed regret at Treasurer Wayne Swan's decision. Indeed, the government's own Preventative Health Task Force has recommended a volumetric tax system.
We fully accept our responsibility as an alcohol producer to pay tax. But alcohol tax alone cannot make a difference to the behaviour of the minority of people who drink irresponsibly. This is a complex issue that goes beyond tax. It requires an evidence-based approach that examines the behaviours that underpin alcohol misuse.
As the New Zealand Alcohol Advisory Council puts it: "It's not the drinking, it's how we're drinking."
Contrary to what some may think, the industry is committed to helping solve the issue of alcohol misuse in the community. We take seriously our responsibilities in this as a producer, in the way we market and sell our products.
What is also needed is for consumers to take responsibility and accountability for their drinking behaviour. Unless we drive this, through regulation and education, we will not make the changes we all want to see in our communities. We have to make being drunk socially unacceptable.
The government argues this is not the right time to make changes to the alcohol tax system because of the wine glut and the present wine industry restructuring. It's interesting, then, that major wine producers such as Pernod Ricard and Foster's are expressing clear support for volumetric tax.
It is also easy to sympathise with wine producers, whose businesses are no longer sustainable because of over-production and price issues, but the reality is the near give-away price of some cask wine is doing little to help bring sustainability to that industry, while doing even less to help address health and social harms in the community.
If solving the wine glut and restructuring the industry is the condition for moving to an equitable and effective tax regime for alcohol, it would be good to understand how the government expects that to happen, and what it will do to facilitate the process. The government should urgently consider measures that will support the rationalisation of the wine industry, without continuing to penalise other sectors of the alcohol industry.
Sticking with the existing tax system is like trying to drive towards a better solution with the handbrake on.
We have experienced at first hand the impacts bad policy can bring to industry. The government's decision to reject the Henry recommendations confirms what we believed all along during the debate last year over increasing taxes on ready-to-drink products: that such measures are driven more by political expediency than by the need to deliver health or social outcomes.
Ditching the Henry recommendations on alcohol tax is certainly a missed opportunity. In announcing it will not make changes to alcohol tax until the wine industry's issues are resolved, we hope the government will not again launch any surprise attacks on the alcohol industry – producers and retailers – in the upcoming budget.
If it were to do so, the public would be entitled to draw its own conclusions about the government's motivation. The Prime Minister has invited a debate on all aspects of the tax system, and we welcome the opportunity.
Perhaps the government could set the ball rolling by answering the tough question being asked by most health advocates and many of us in the alcohol industry: when is it the right time to reform an unfair alcohol tax system?”
The above piece was written by Diageo MD, Tim Salt, and appeared in today’s (May 7) The Australian newspaper.