The brewing industry has called for cuts to Australia’s beer tax rate following the latest rise in excise from the Government.
Following the announcement on Monday 5 August, the tax on Australian beer has risen 21 cents a litre on draught and 30 cents a litre for stubbies, cans and longnecks.
“We are fast approaching the 40th increase in excise since the base rate was pretty much doubled at the time that GST was introduced in 2000,” notes Jamie Cook, chairman of the Independent Brewers Association. “Continuing to have excise ratcheted up every six months and having such a complex excise structure across various alcohol bands is looking archaic and completely out of step with a more modern society.”
Data released by Brewers Association of Australia has shown that, compared to countries with similar economies, Aussies are paying by far the highest proportion of their incomes in beer tax.
Brett Heffernan, CEO of the Brewers Association of Australia, has called for a cut in beer tax, stating that a freeze isn’t enough.
“Calls for a mere freeze in the six-monthly CPI hikes to beer tax just won’t cut it,” says Heffernan. “All that does is lock-in the unreasonably high taxes Aussies are already paying. It gives punters no price relief.
“It’s already a hefty tax at $2.19 per litre for packaging beer. (The) tax hike on beer will make a night with family or friends just a bit more of a stretch for many Australians.”
“The CPI increases may not sound like much, but these six-month Government increases in beer tax are really adding up. Tax is already the biggest cost in the price of an Australian-made beer, accounting for almost half (42%) of the price of a typical carton of full-strength beer. Of the $51.00 retail price, $21.35 is tax.
“Along with Norway, Japan and Finland, Australians pay the highest beer tax in the world. We then pay another 10% in GST, including GST on the beer tax itself, at the retail end.
“Beer tax (excise) in Australia represented 0.59% of federal tax revenue in 2017-18. In the EU, the average for beer excise as a proportion of tax revenue in countries at the same income level was just 0.37%.
“Last year, Aussies coughed up over $3.6 billion in beer taxes – excise and GST. That headline figure is huge, and the day-to-day tax burden worn by Australians enjoying a drink is over-the-top.
““Beer tax (excise) in Australia represented 0.59% of federal tax revenue in 2017-18. In the EU, the average for beer excise as a proportion of tax revenue in countries at the same income level was just 0.37%.”
Undoing excise refund plans
Last year, the federal government announced that it would increase the excise refund for brewers from $30,000 to $100,000, a change that came into effect on 1 July 2019. These changes were introduced after considerable lobbying, but Richard Adamson, one of Young Henrys’ directors, worries that these biannual tax increases will offset the gains made by the earlier changes.
“The hard-fought excise relief we received is most likely used up by independent breweries through capital expenditure or extra staff hires,” he explains. “The truth is that the biannual rise of excise just means that everyone’s favourite beers are going to become more expensive. The consistent biannual rise of excise means we have to manage our wholesale price, either by absorbing the costs or raising the price accordingly. This, coupled with the constant downward pressure on pricing from customers, can make it difficult to make a buck.”
“This refund is still a far cry from the $350k refund that is available to winemakers, and unlike wine which pays excise via another archaic mechanism WET, the impact of the excise refund to brewers is negatively impacted by the increase in the excise rates every six months,” adds Cook.
“The IBA will be continuing to advocate for a modernisation of alcohol taxation to a system that recognises and rewards the producers and drinkers that are creating value for the economy and are fostering a more responsible and connected society.”
Analysis from economist and emeritus professor Kym Anderson AC from the University of Adelaide has shown that Aussies pay more than three times the weighted OECD and EU member average of 70 cents.
“It will come as no surprise to Australians who have travelled and noticed the price on a beer overseas compared to what they pay at home,” says Anderson. “The key reason for the difference is the greater rate of beer tax in Australia.”
A beer tax comparison with other nations around the world puts the figures into perspective:
- 18-times more than Germany ($0.12 per litre)
- 15-times more than Spain ($0.14)
- 8-times more than the US ($0.28)
- 6-times more than Canada ($0.37)
- around 5-times more than France ($0.47)
- almost double that of New Zealand ($1.18)
- almost two-fifths more than the UK ($1.37)
Anderson’s paper ‘Excise Duties on Beer: Australia in International Perspective’ is available online at brewers.org.au.