Spirits Tax is Fuelling Inflation, ABS Data Confirms

Federal Government data has further confirmed that the automatic CPI indexation of spirits tax is jeopardising its efforts to curb inflation. The data, published yesterday, has been released less than a week prior to the implementation of the new Spirits Tax increase of $101.85 per litre of alcohol. 

“The Alcohol category was the biggest contributor to the December CPI quarter increase, accounting for a 2.8% rise,” said Greg Holland, Spirits & Cocktails Australia’s chief executive.

“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.”

“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.” 

Australian spirits manufacturers are currently faced with the third highest spirit taxation rates in the world. As a result, a chasm has formed between the pricing of spirits and other alcohol categories, something Bundaberg brought into public limelight with its recent marketing campaign.

“Without intervention, the current alcohol tax system is increasingly discriminating against Australians who enjoy whisky, gin, vodka and other spirits,” said Australian Distillers Association chief executive Paul McLeay.

“There are more than 600 spirits manufacturers affected by this archaic policy.

“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.”

Distilleries also note the disadvantaged position in which smaller-scale operations are being placed. 

“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,” said co-founder of Manly Spirits Vanessa Wilton. 

“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.”

The spirits tax is also causing certain spirits producers to shift towards export-focused business models. One example is Queensland’s Cavu Distilling, Australia’s third largest rum producer.

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

“We can’t continue to pass these costs onto consumers in the current economic environment.

“Given these continued excise increases, it is clear that the Government doesn’t share our concerns.”

The update to the Spirits Tax this coming Monday will be the 74th time it has increased.  

“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,” said Greg Holland.