GROWING SUPPORT FOR ALCOHOL TAX INQUIRY

Last November, I wrote in this column that the fundamental principle that should be applied in the development of alcohol taxation systems is that products of similar alcohol content should be taxed similarly. This is not only rational and equitable, but also would provide clear incentives to both produce and consume lower alcohol products – the lower the alcohol content, the lower the tax.
  Since then, the calls for a fundamental re-think on alcohol taxation have been continuing to grow, from significant sections within both the health lobby and the alcohol industry.
  One of the latest, and most significant voices of support comes from the Alcohol and other Drugs Council of Australia (ADCA) – the national peak body for the drugs and alcohol sector. ADCA have recently released their comprehensive Alcohol Taxation Policy Statement calling for significant changes to the current alcohol taxation structure.

This policy statement opens saying:

“ADCA believes that all alcoholic beverages should be taxed consistently according to their alcohol content. …Taxation according to alcohol content would represent sound and progressive health, economic and social policy making. ADCA is supported by a broad coalition of organisations and individuals in promoting this policy approach.”

ADCA calls for alcohol taxes that do not “distort production and consumption decisions”, that “closely substitutable products (be) taxed at similar rates”, and for clear incentives to encourage the production and consumption of lower alcohol beverages.
  The policy statement also notes that “present Commonwealth Government alcohol taxation policy promotes alcoholic beverages that cause most harm”, that the Wine Equalisation Tax disadvantages small wine producers and “may actually be discouraging innovation and production of premium wines and encouraging mass production of lower quality wines”, and that consolidation in the alcohol industry amongst brewers, winemakers and distillers “strengthens the argument for a single, consistent alcohol tax regimen”.
  DSICA has long been calling for a more consistent basis to the alcohol tax system, believing it simply makes no sense for drinks of equal alcohol content to pay very unequal amounts of tax. The current ad hoc alcohol taxation structure taxes alcohol products according to method of manufacture, rather than alcohol strength. For example, comparing equal amounts of alcohol, a standard drink of spirits pays over twice as much tax as beer or bottled wine, and nearly twelve times as much tax as cask wine. Furthermore, although spirits make up only 12% of Australia’s alcohol market, they pay 28% of the government’s total alcohol taxation revenue – over twice their fair share.
  DSICA welcomes these growing calls for reform of the current alcohol taxation structure, and strongly believes there is now a pressing need for a comprehensive inquiry into alcohol taxation – to review the existing ad hoc and discriminatory arrangements, and to ensure that appropriate levels of taxes are applied to each alcohol category, on a sound and consistent policy basis. Such an inquiry would enable the Government, the community, the health sector and the alcohol industry to consider the appropriate economic, public health and policy outcomes desired from alcohol taxation, and to ensure the sustainability of taxation revenue from alcohol in the longer term.

This article was first published in National Liquor News,
August 2002