Taxes are never popular, they can be hard to understand, poorly targeted and discourage innovation. Taxation of alcohol in Australia is one such example of this.
The system is complex and run under two separate systems: an excise duty (a volumetric tax) for beverages other than wine and a Wine Equalisation Tax (a value tax). For the purposes of the latter, wine is defined as grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead and sake.
The excise duty is a volumetric tax as it is calculated at dollars per litre of alcohol content, however, this will vary depending on the type of alcohol, sizing and alcoholic strength. This means that it will be cheaper to buy a mid-strength tap beer at the pub (defined as ‘draught beer’) compared to bottled light beer (defined as ‘packaged beer’).
Wine is taxed on the value of the final wholesale value at 29%. In 2004, a rebate was introduced of 29% of the wholesale value of eligible sales, up to a maximum of $500,000 per year, the stated aim being to support small rural and regional wine producers.
While a complicated issue, it is becoming increasingly clear that taxation of alcohol needs to change. This is also not a new issue, since 2008 there have been calls for a volumetric tax on alcohol but in 2016 there is a combination of changing global demand for Australian wine, a growing innovative distillery industry, market inefficiencies and private and public sector research suggesting that now the time is right for an introduction of a volumetric tax on all alcohol types.
We believe the benefits outweigh the negatives from a public health, tax and economic view. In conjunction with the impending release of the Senate inquiry report into the Australian grape and wine industry, over the next two weeks we will be arguing that in addition to being inefficient and not addressing spillover costs (of which there is plenty of research), the current alcohol tax regime is hindering an emerging distilling market of growing international renown.
Next week we will focus on how the current system is inefficient, the relevance of the Senate inquiry findings and why we believe support for distilleries is important.
Kingfisher Law are Australia's agribusiness legal specialists and will discuss any legal issue you may be experiencing, in a confidential and professional manner. Call 1300 529 424 to book a consultation.