NATIONAL
LIQUOR NEWS – August 2006
RTD Taxation by Gordon Broderick
DSICA has long argued that ready to drink beverages (RTDs) and beer should receive the same tax treatment. Recently DSICA had the opportunity to put its views before the Commonwealth Government’s Senate Economics Legislation Committee. That committee has since reported to Parliament and has recommended the same tax and excise treatment should apply to low and mid strength RTDs as is applied to similar strength beer product.
Currently both RTDs and beer face an excise rate of $36.98 per litre of alcohol. However, beer receives a benefit from a tax free threshold of 1.15%. Therefore, an RTD of 5% alcohol by volume (abv) faces an excise of 69 cents per 375ml. The figure is beer is lower because the tax free threshold means that the excise rate is only applied to 3.85% (ie, 5% minus 1.15%) of the alcohol. The corresponding excise on beer is just 53 cents. A lower excise rate also applies to low alcohol beer.
Given that alcohol is alcohol is alcohol it makes sense to charge the same rate of tax regardless of whether a product is brewed, distilled or fermented.
The present tax arrangements have resulted in the growth of low and mid-strength beer market. This segment makes up around 10% of the entire alcohol beverage market. The low and mid-strength market for RTDs is not even 1% of the alcohol beverage market. DSICA argues that tax equivalence would encourage manufacturers to produce low and mid-strength RTDs.
DSICA’s submission to the Senate Committee argued that lower strength RTDs should receive the same tax treatment as lower strength beer. DSICA considers that evidence-based arguments, on both tax policy and health grounds, are compelling reasons for this change. DSICA’s detailed submission can be found at: http://www.dsica.com.au/sections/new/index.html.
Our position is supported by key agencies in the alcohol and drug field, including the Alcohol and other Drugs Council of Australia (ADCA), the Australian Medical Association (AMA), Odyssey House Victoria and the National Drug Research Institute (NDRI). The Australian Hotels Association also supports this position.
In terms of reform of the alcohol taxation regime, the Senate Committee considered that in principle a volumetric tax for all alcohol beverages should in the long term be adopted. The Committee also recommended that the Government should apply the same tax and excise treatment to low and mid-strength RTDs as is applied to similar strength beer products. In addition, the Committee recommended the Government consider the adoption of a volumetric tax system for all alcohol products, and that the Government now commence planning and consultation with relevant parties as a step towards this goal.
The Committee also found that much of the negative publicity surrounding RTDs is at best impressionistic, if not misplaced, and does not reflect empirical research. The Committee refered to DSICA research that suggests, contrary to popular belief, youth and underage alcohol consumption or dangerous drinking is not rising, and that the growth in RTD sales has been at the expense of beer, wine and full strength bottled spirits rather than has led to increased consumption.
In weighing up the evidence the Committee considered that the arguments against equalising the tax regime for low and mid-strength RTDs are both overstated and overlook the public benefits in promoting consumption of lower strength alcohol products.
DSICA commends the Senate Committee for its findings and trusts that the Government will consider these findings when it formulates the next Commonwealth Budget. DSICA considers that reforming the excise system in this way will deliver health outcomes to the community by providing consumers with a greater choice or lower strength alcohol products.
