Red Tape Update: Senate Committee Recommends Singular Volumetric Tax Across all Alcohol

The Senate Committee has released the interim report on the effect of red tape on the sale, supply and taxation of alcohol and its recommendations for alcohol tax reform. The report comes after an inquiry was instigated and chaired by Liberal Democrats Senator David Leyonhjelm.

The Committee made the following recommendations to the Federal Government:

• Introduction of singular volumetric tax rate across all alcohol products to target alcohol content rather than the mechanism by which the alcohol is delivered
• Establishment of clear policy objectives for the taxation of alcohol
• Changes to legislation to enable big businesses to settle alcohol tax liabilities monthly
• Simplification and streamlining of liquor licensing systems
• Target enforcement of existing regulation rather than a blanket approach to for all licensees
• Recognition of Responsible Service of Alcohol certification acquired interstate

Diageo Australia spoke at the Red Tape Senate Committee Hearing in Sydney held last month and has welcomed these subsequent recommendations. Diageo said the introduction of a singular volumetric tax in particular was well overdue.

Jules Norton Selzer, External Relations Manager, Diageo Australia said, “Diageo has long argued for tax equivalence – that is that all alcoholic products be taxed on the amount of alcohol they contain regardless of whether they are made from grape, grain or distilled. Just because you prefer a gin and tonic over a schooner of beer or glass of red, doesn’t mean you should be penalised financially for it. Ultimately alcohol is alcohol and all alcoholic products should be taxed at the same rate.

“This common sense approach, also known as volumetric tax, is the simplest, fairest and most economically sound way in which to tax alcohol.”

Other inquiry participants echoed this sentiment. DSCIA submitted to the Committee, “The ideal system for alcohol tax is a single volumetric tax rate for all alcohol beverages. Such a tax supports consumers' choices and recognises that all alcohol is the same, regardless of the type of beverage. A single rate volumetric tax would be simpler, fairer, and more efficient, ending the discrimination between drinkers.”

However, the Australian Taxation Office argued that the singular volumetric tax had not been thought through. A representative of the ATO told the Committee, “Is that a [tax] that applies to wine or is that a volumetrics that applies to all alcohol at a single rate that draws in? I do not believe that that has been thought through by some of the advocates of a volumetric system. I think they have looked at it in their own patch. You could say: 'Wine collects X. What would a volumetric rate be to get X? Beer collects Y. What would a volumetric rate be to collect for beer?' You could split it up or you could go to one.”

The Committee noted that there are various calculations of a revenue neutral rate of volumetric tax, ranging per litre from $32.39 (based on 2013–2014 figures) to $36.50 (based on 2015–2016 figures) and irrespective of the precise figure, this rate would be much lower than as is currently levied for brandy, spirits and RTDs.

The Committee advised the Federal Government that the singular volumetric tax system be phased in, a recommendation Diageo supports.

"While Diageo strongly believes in single volumetric tax system, we agree with the Senate Committee’s recommendation that this be introduced in a phased manner to allow industry to adjust,” Selzer said.

“We would like to see some concrete steps towards this in the upcoming budget, for example an immediate freeze on the twice yearly CPI tax increase, which beer and spirits products are subject to.

“As we said in our submission to the Senate Committee, an increasingly challenging regulatory landscape and ‘red tape’ culture is suffocating the spirits industry, with Australian distillers and consumers currently paying some of the highest alcohol taxes in the world.

“It’s time the Government adopted a clear policy objective for the taxation of alcohol products and fix the alcohol tax system once and for all."

The Senate Committee on Red Tape’s interim report can be found here.