Divergent alcohol levies in budget office’s sights
With the government soon to release a preliminary view on options for broader tax reform and Treasury looking to overhaul rorts in the wine equalisation tax, the parliament’s independent economic researcher highlighted how alcohol in spirits and high-end wine was taxed far heavier than that in beer or cheaper wine.
The study found at least 45 discretionary changes to the taxation of beer since 2000, noting that effective alcohol tax rates varied from $1.71 a litre of alcohol for low-strength beer to almost $80 a litre of alcohol for spirits and alcopops. Meanwhile, wine alcohol tax extended from $3 a litre for cask wine to, for example, $45 a litre for a $40 bottle.
Beer and spirits are taxed under an excise system based on the product type and alcohol content, while wine is taxed at a rate of 29 per cent on the sale price.
“Australia’s alcohol taxation system has evolved over time, and reflects a range of perspectives on what alcohol taxation is intended to achieve at the time different changes were made, rather than having been designed from a set of consistent policy principles,” the report said.
Spirit manufacturers have called for an overhaul of alcohol taxes, claiming they are taxed too highly compared with that in other countries and for other alcoholic drinks.
Michael McShane, who heads distiller Brown-Forman in Australia, said a standard spirits drink had the same alcohol content as a standard drink of wine or beer, but was taxed at three times the rate. He said the tax regime “penalises the many thousands of Australian spirits consumers and puts spirits companies at a competitive disadvantage”.
The Distilled Spirits Industry Council of Australia wants to move to a volumetric tax across all forms of alcohol, replacing a series of volume-based excises applied to beer and spirits and the value-based wine equalisation tax. Alcohol taxation, which last financial year made up about 1.4 per cent or $5.2 billion of federal tax receipts, will be reviewed in the government’s tax reform green paper due within weeks.
Premium winemakers Treasury Wine Estates and Pernod Ricard have backed the move to a volumetric tax, but it has split the rest of the industry, with makers of bulk and lower-priced wines fearing change would lead to a higher tax on their products.
In August, federal Treasury found a rebate for the WET was costing $300 million a year and was being widely exploited by wholesalers, distributors and “virtual winemakers’’.
The PBO study released yesterday stopped short of making explicit recommendations. But the 2010 Henry tax review attacked the current system and recommended a volumetric system.
Source: The Australian - 15th October 2015
