Spirits & Cocktails Australia has renewed its calls for an overhaul of Australia’s punitive spirits tax regime, which it says is outdated and hurting the economy, distilling industry and consumers.

Spirits tax will increase on February 5 to a new high of $101.85 per litre of alcohol, off the back of the December quarter CPI increase.

However, Federal Government data released on Wednesday confirmed automatic CPI indexation of spirits tax is undermining its efforts to curb inflation.

Spirits & Cocktails Australia chief executive Greg Holland said it was the 74^th such increase levelled at Australian spirits manufacturers, which were already paying the world’s third highest spirits tax.

“Inflation is still well beyond the target rate of 2.5% and we can safely assume that spirits excise remains a major culprit, because the ABS previously disclosed that spirits was the biggest contributor to rising alcohol prices in the September quarter,” he said.

“The alcohol category was the biggest contributor to the December CPI quarter increase, accounting for a 2.8% rise.

“This was nearly twice the rate of the next highest category, Insurance and Financial Services (up 1.7%), even taking into account that insurance prices last year experienced their strongest annual rise in 22 years.”

Holland said the figures should compel the Federal Government to reconsider the automatic indexation of spirits excise, an archaic policy introduced by the Hawke Government in 1984.

“That was a time when Australians were mostly drinking cask wine and Foster’s. The Twelfth Man topped the music charts and Hey Hey It’s Saturday was considered to be cutting edge television.

“If this tax was appropriate back then, it certainly isn’t now. Our tastes have changed in every way, with more and more Australians appreciating spirits as their preferred tipple in mixed drinks and cocktails.

“We call on the Federal Government to freeze this unbearable tax at the current rate for two years so that we can all sit down at the table and discuss a workable solution.”

Discriminatory spirits tax should be frozen

Australian Distillers Association chief executive Paul McLeay said automatic indexation has opened up a chasm in pricing between spirits and other alcohol categories, which were taxed at a lower rate from the outset.

“The compounding effect of these six-monthly increases is now being felt with increasing severity by spirits manufacturers and consumers,” he said.

“Without intervention, the current alcohol tax system is increasingly discriminating against Australians who enjoy whisky, gin, vodka and other spirits.”

McLeay said there were only two distilleries subject to this tax when it was originally introduced.

“Now there are more than 600 spirits manufacturers affected by this archaic policy,” he said.

“Our industry contributes $15.5 billion in added value to the Australian economy, supporting 5,700 spirits manufacturing jobs and a further 45,400 jobs in spirits wholesale, retail and hospitality.

“The Federal Government must act now to safeguard our industry’s future by temporarily freezing this unfair and damaging tax.”

Craft distilling industry suffering

Vanessa Wilton, co-founder of Manly Spirits on Sydney’s Northern Beaches, said the tax increases threaten to extinguish Australia’s emerging craft spirits industry.

“Our margins keep getting eroded to the extent that we have to be very careful we don’t end up selling our products for nothing,” she said.

“My fear is that the craft industry will consolidate into just a few players and we will go back to the old days where Australia was only an importer of spirits.

“That would be incredibly sad, because this industry has so much potential to add value to the wonderful distilling ingredients we have in this country.”

Sunshine Coast distillery Cavu said it will focus on exports to limit its exposure to Australian spirits excise,

“We can’t continue to pass these costs onto consumers in the current economic environment,” co-founder Matt Hobson said.

“We have worked very hard to ensure we can retain our existing workforce. Given these continued excise increases, it is clear that the Government doesn’t share our concerns.”

Starward Distillery founder David Vitale said Australia’s regulatory environment had driven him to establish its brand in the US, where spirits excise was $10 a litre.

“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.”

Bundaberg Rum campaigns against Australia’s spirits tax