Retailers, suppliers and industry bodies are pleading with the Australian Tax Office not to raise the excise duty rates for alcohol this week.
Excise duty rates for alcohol are raised twice a year, in line with the consumer price index (CPI). Generally, indexation occurs on 1 February and 1 August.
The rate on spirits, for example, will increase from $88.91 per litre of pure alcohol to $90.78 from next month. Spirits and Cocktails Australia has asked for tax increases to be halted for three years to help producers.
“The Australian way is to give a hand in a time of crisis, but instead this government has given us a hike – the fourth brutal tax hike since COVID arrived on our shores,” chief executive Greg Holland said.
The Australian Hotels Association, Clubs Australia and the Brewers Association have launched a campaign with Queensland pubs and clubs for a 50% cut to the twice-yearly scheduled tax hike on draught beer.
The organisations want the tax levied on a keg of beer cut in half – from $70 to $35 – which they say would reduce that tax bill of an average pub by $500 and the tax payable on a single pint of beer by 40 cents.
Beer tax one of the highest in the world
Research released by the Brewers Association last year revealed that Australia is set to have the third highest tax rate on beer in the developed world by 2023.
The research, conducted by the School of Economics at the University of Adelaide, found that Australia’s tax rate, currently the fourth highest in the OECD, will overtake Japan’s in October 2023. This is due to the twice yearly tax increases in Australia and a beer tax cut that has been announced by the Japanese Government.
At that stage only Norway (1st) and Finland (2nd) out of the entire OECD will have higher taxes on beer than Australia and Norway reduced its tax rate by 10% this year, narrowing the gap with Australia.
UK Chancellor of the Exchequer, Rishi Sunak MP, slashed the tax on draught beer in the UK in October to support the hospitality and brewing sectors.
Chief Executive of the Brewers Association of Australia John Preston said: “We are calling for the Federal Government to use the forthcoming Federal Budget to reduce Australia’s fourth highest beer tax in the world to give pubs and clubs a fighting chance.
“We are very concerned that on February 1 the Australian Government will hit Australian beer drinkers with one of the biggest tax increases in more than a decade – it’s not right and it’s not sustainable. Other countries have been reducing their tax on draught beer to give pubs and beer drinkers a break.
“We are totally out of step on beer tax with comparable countries like the UK and on a different planet from major beer producing nations such as Germany, the US and Belgium where the rate is less than a quarter of what we pay here.”
Queensland Hotels Association chief executive Bernie Hogan said: “This year – after our members have done the right thing throughout the pandemic and at a time when jobs and businesses hang in the balance – we ask that pubs and drinkers get a break.”
Australia has the fourth highest tax on beer behind Norway, Finland, and Japan out of countries in the Organisation for Economic Co-operation and Development.
Preston said the federal government needed to give pubs and clubs a fighting chance.
“The industry is telling us they want to help out their patrons as well as employ more as they rebuild. But the high level of tax is holding them back,” he said.
Cellarbrations at Gisborne owner Tony Bongiovanni (above) said independent liquor retailers are feeling the backlash from consumers who are angry about tax-driven price rises.
“We are the front face of these ridiculous automatic increases to the consumers,” he said. “Every time prices increase, we get the blame from customers! I remember when this indexation was introduced by the Keating Government way back as a temporary measure when inflation was rampant. But unfortunately in today’s modern climate, this automatic tax hike is now hurting breweries and distilleries and should be abolished. Producers and retailers keep absorbing some of these increases, but for how long can they continue to bear the brunt?”
How COVID has decimated pub beer sales
Australian Tax Office figures show that pubs and clubs sold 40 million fewer pints of beer between July and September last year than they did during the same period in 2019 and before COVID-19.
That’s a massive drop of more than 50% in beer sales for struggling venues.
In 2020, pubs and clubs lost over $1 billion in beer sales due to lockdowns and other restrictions, but these latest figures from the ATO show that losses for 2021 could well exceed that.
The ATO recorded 903,982 litres of alcohol as having been served in beers over the counter in July-September 2021 compared to 1,993,027 litres during the same period in 2019.
Pubs have also been hit with staff shortages and supply chain issues in recent months.