Are higher alcohol taxes on the way?

Posted by Daniel Palmer on 8th May 2008

In the wake of the 70% tax increase on ‘ready to drink’ alcoholic beverages (RTD’s) which has shocked consumers and industry professionals alike, the Rudd government is also set to levy a higher tax on beer and wine. Such an action threatens the future of the local micro brewing industry, according to Snowy Mountains Brewery director Kevin O’Neill.

“This tax comes on top of 50% excise already paid per carton and makes it almost impossible to survive for most in the micro industry. This figure is too high. The bigger breweries may be able to sustain these costs but most small operators will struggle. We should have a form of tax relief whereby the more product made, the more excise paid. That is not the current reality, and to have a 300% increase in tax proposed defies belief”, said Mr O’Neill, who founded the award winning boutique label.

“We already pay CPI excise twice a year so to raise taxes even more so is just asinine” he added.

“If the reason they have proposed this tax is to stem binge drinking, then why forecast a figure of $2billion in revenue raised in 4 years at current drinking levels? It is transparent that the real reason for this proposal is as a revenue raising exercise. This will kill the micro industry because we don’t cut corners, we don’t use inferior adjuncts like cane or corn to offset rising costs.”

“The Labour government is supposed to be the people’s government and look what they are doing to employment with small business. This must discourage investors from being involved with micro brewers because the margins don’t make it an appealing investment”.

It has commonly been said in the industry that 90% of micro breweries collapse in the first three years, according to Mr O’Neill.

“This will make sure that estimation is on the mark if it isn’t already. If the increased prices for barley malt and hops aren’t already challenging the smaller breweries enough, this tax rise will surely place some in jeopardy. This is a band-aid solution from the Rudd government, a great example of smoke and mirrors. People will still continue to buy alcohol, they will just cease to go to the pub or they will buy cheap alternatives with nastier ingredients or make their own, which means the alcohol can’t be regulated. So, two industries will be affected.”

“We try to do the right thing and make a better product with better ingredients, and this is suggested – it is unfathomable.”

Mr O’Neill said beer consumption in Australia is already the lowest since 1961.

“With already elevated living expenses, food costs and interest rates, this tax increase will surely be felt by many consumers and have a negative impact on smaller breweries around the country.”