Craft distillers and large spirits companies have joined together for the first time in Canberra this week, calling for urgent government action to fix Australia’s spirits tax regime. 

Australia currently has the third highest spirits tax in the world behind Iceland and Norway, with distillers pay $88 of tax per litre of pure alcohol. Automatic six-monthly indexation, leading to disproportionate burden placed on spirits, compared to all other alcohol categories. 

A joint Pre-Budget Submission by the Australian Distillers Association and Spirits & Cocktails  Australia recommends reducing the spirits tax to match brandy, and freezing CPI increases for three years to ease the burden on distillers recovering from bushfires and COVID-19 lockdowns.  The alliance is also calling for an increase in the excise refund limit, from $100,000 to $350,000,  to grant craft distillers an equivalent level of support to small wine producers. 

“About two-thirds of Australian distillers are based in rural and regional communities and after a horror year, they urgently need this unfair tax fixed,” ADA President and Four Pillars co founder Stuart Gregor said. 

“Once they bounce back, we know the benefits will flow from the farm to the glass. They’ll  create more jobs, buy more produce from rural suppliers and help attract tourism to their  communities, but they are being held back by this punitive tax burden.” 

Cape Byron Distillery, for example, estimated it would save $68,000 a year if CPI increases on the spirits tax was frozen. That would allow it to hire an extra salesperson, who could potentially sell a further 840 cases of spirits a year and bring in $600,000 in revenue.

The ADA said the submission’s recommended action would also be revenue-positive, boosting tax revenues by $1.4 billon over forward estimates, according to independent modelling conducted  by PwC. 

Spirits & Cocktails Australia Chief Executive Greg Holland also cited evidence from the United  Kingdom, where a decision in 2017 to freeze the spirits tax actually boosted government  revenue and prompted a wave of investment, particularly in rural areas. 

“In comparison, Australia’s out-of-control tax is now so high, it is actually suppressing demand,  meaning less revenue than if the tax rate was lower,” Holland said. 

“This simple change would mean more money in government coffers to spend on social  services and other investment as the economy recovers from COVID, as well as a much-needed  stimulus for our distillers and the tourism and hospitality sectors. 

“What’s more, we know Australian spirits can compete on the world stage and they have the  potential to become a lucrative export earner. But right now you can buy a bottle of Australian  whisky or gin in the USA and pay less than you pay here. That’s just crazy.” 

The modelling, conducted for Spirits & Cocktails Australia by consultancy firm PwC, analysed three different options to make Australia’s alcohol tax regime more fair by either: cutting the  spirits tax rate to match the brandy rate; freezing CPI rises for three years; or a combination of  both measures. 

The PwC modelling showed all three options would aid the spirits sector while generating more revenue for Treasury.  

Pictured main: Papa Gedes Bar, Kent St, Sydney