Volumetric excise a brave move?
If a flat tax is introduced it would simplify the tax system but it would change the economics of the entire industry. In a nutshell, cheap wine would increase in price, premium wine would fall, spirits and alcopops would fall, and beer sold in pubs and clubs would rise.
The screams from the various lobby groups, some of which are incredibly powerful, would be deafening. Beer, spirits and alcopops are taxed on the basis of their alcohol content, with spirits and alcopops taxed at a higher rate because of the perceived greater risk of abuse.
Wine is the big anomaly, being taxed on price rather than volume. This means low-value cask wines attract little taxation while more expensive bottled wines carry higher tax under the Wine Equalisation Tax (WET).The wine lobby is undoubtedly powerful but the Rudd Government may not be inclined to protect the wine industry indefinitely.
Regardless, any changes to alcohol taxes are politically and practically very challenging. The debate is complex and many in the industry believe it will be too politically damaging to introduce a simple system which taxes all alcohol in the same manner. The wine industry is already crying ‘foul’ and, in fact, is asking for tax relief rather than removal or changes to the WET regime as it fears that such moves could result in the loss of 12,000 jobs.
The review of Australia’s alcohol tax is played out against the backdrop of a headline-grabbing debate over binge drinking. Media emphasis in January 2010 centred on the costs of binge drinking. For example, research by the Roy Morgan Group, a research company, shows that if every Australian drinker adhered to the safe drinking guidelines, sales of alcohol would be more than halved.
The figures indicate that the 17 percent of drinkers who consume more than 22 standard drinks a week account for 53 percent of alcohol sales by volume.
Australia’s total alcohol market is estimated to be worth AUD 163 billion (EUR 104 billion) a year with beer making up nearly half.
Latest industry data show that alcohol consumption is increasing, in the eyes of some commentators an indication that the battle against binge drinking is being lost.
