IBISWorld has analysed the impact of a flat volumetric tax for the alcoholic beverages sector as the debate about taxation on beer, wine and spirits heats up ahead of the federal budget next month.
The proposal for a flat volumetric tax on all alcoholic beverages has been circulating since the Henry Tax Review in 2010. With this model, the aim is to reduce complexity and even the playing field between the different alcohol sectors.
IBISWorld senior industry analyst Mr Andrew Ledovskikh, who compiled the analysis, agreed that the current taxation system is complex. He found that there are currently a range of various tax rates applicable to alcoholic beverages across 16 different excise categories in Australia.
“Beer and spirits are taxed on an excise system, with rates of taxation varying by the type and strength of the product,” said Ledovskikh. “However, all wine, as well as traditional cider, is taxed based on its wholesale value.”
Ledovskikh said a flat tax would most likely be equal to the current excise tax rate for full-strength packaged beer.
“Such a proposal is more likely to be the point of discussion over the next month or so as the long-anticipated election-year budget is handed down.”
The discussion surrounding changes to the excise tax regime will also be fuelled by the senate inquiry into the winemaking and grape growing industries, he said.
“If such a change were introduced, it would have significant consequences for the alcohol manufacturing sector.
“If volumetric taxation is introduced, IBISWorld anticipates the price of bulk wine, draught beer and unflavoured cider without added alcohol or sugar would increase, assuming that the Wine Equalisation Tax is abolished.”
A pre-budget submission by the Foundation for Alcohol Research and Education (FARE) takes this a step further. FARE is recommending a 10 per cent increase in tax across all alcoholic beverages, combined with a shift to tax wine on a volumetric basis.
According to IBISWorld, these changes combined would result in a decline in total alcohol consumption of 9.4 per cent, and raise $2.9 billion dollars annually.
“The effects of any change or changes to alcohol taxes depend on whether a new tax is levied evenly across the various alcoholic products,” Ledovskikh said.
“As with the alcopops tax, an increase in tax on one beverage might lead to substitution, and therefore a redistribution of revenue among alcohol-producing industries.”
