Spirits excise is once again scheduled for increases next month and in August and Australia’s spirits manufacturers are calling on the Government to freeze spirits tax increases and instead focus on supporting this promising industry.
In August last year Australia’s spirits tax rose to over $100 per litre of alcohol and the bi-annual indexation continues to fuel inflation and cost of living pressures, having already risen in line with the Consumer Price Index (CPI) by a total of 12.5 per cent in under two years.
Spirits & Cocktails Australia Chief Executive Greg Holland said Australia’s spirit manufacturers cannot stomach further increases to this tax, which is the world’s third highest behind Iceland and Norway.
“The Federal Government’s own data is starting to bear out the folly of this outdated excise regime,” he said.
“Despite a record high tax, the December budget update revealed a projected $170m shortfall in revenue from spirits excise in 2023-24.
“This is clear evidence that the tax is making spirits unaffordable for consumers. Continued increases would be nonsensical; consumers, manufacturers and the Government all lose out to this inefficient tax.”
Not only is the high level of tax actually causing a shortfall in the Federal Budget, but as the Government continues its fight again inflation and the high cost of living the Australian Bureau of Statistics’ September Quarter results found spirits was the largest contributor to an annual CPI increase of 4.9 per cent for the alcohol category, thanks to the bi-annual tax hike.
Holland added: “This highlights that the rising costs of alcohol, fuelled by excise increases, is being felt by hardworking Australians.”
Australian Distillers Association Chief Executive Paul McLeay said the 600 distilleries spread across the country need urgent respite from this punitive tax.
“The average Australian would be appalled if they knew just how much of the hard-earned money they spend on spirits goes directly to the Government,” he said.
“Spirits tax above $100 a litre should be a barbecue stopper this summer.
“We are calling on the Government to freeze this un-Australian and unbearable tax so we can work together to develop policy settings to support the sustainable growth of this promising industry.”
David Vitale, founder Starward Whisky, highlighted just how damaging the continual tax rises are for new distilleries in particular:
“It’s often said that compound interest is the eighth wonder of the world,” he said.
“When I wrote my business plan in 2007, spirits excise was around $64 a litre. Here we are 15 years later and it’s over $100.
“Start-up businesses have a fixed amount of capital available to scale and grow, and every six months that’s compromised by the government giving themselves a pay-rise.
“Every dollar increase in excise is a dollar less that we have to invest in scaling our businesses.”
Trent Fraser, CEO Top Shelf International, said operators in other countries cannot believe just how harsh the spirits excise is in Australia.
“Having spent 20 years abroad working for American and French companies, my former colleagues think I’m lying to them when I tell them about the excise regime in Australia,” he said.
“It’s the worst market I’ve ever operated in. It is just obscene when you consider our tax is ten times that of the US market.
“Domestically it’s almost impossible to make a quid under these circumstances.
“It needs serious reform. The fact that government tax policy actually contributes to the inflation we are seeing in Australia at the moment makes it very difficult to survive, let alone thrive under these conditions.”
Chair of the Bundaberg Distilling Co. Amanda Lampe has also joined the fight, saying: “We’ve been talking to Bundaberg Rum customers across the length and breadth of this great state and we know many of them are doing it tough. They know alcohol should be taxed, but a 63 per cent tax on a one-litre bottle of Bundy UP just seems outrageous.”
“We do our best to make our products as affordable as possible for our customers, as we grapple with increases in energy, raw material and freight costs, but the way we’re taxed makes this a real challenge.
“We know this isn’t a problem that the current Federal Government created, but we’re asking them to help fix it by freezing the excise on spirits, because the tax on Bundy is frankly too much to bear,” Lampe said.