Originally published by ABC Rural, written by Daniel Mercer
Boutique alcohol producers are calling for tax relief in 2020, saying punishingly high levies are stifling growth in the industry and leading to perverse social outcomes.
Boutique producers say Australia's alcohol taxes are among the highest in the world, with a large burden skewed towards higher-value productsOne producer said his company paid about $1.4 million in excise, but said if based in New Zealand, the tax would be $500,000, and $35,000 if in the USThe Treasurer said there were no plans to change alcohol tax settings, but said the Government was "fast-tracking" the lowering of company taxes.
With millions of people set to enjoy Australian-made wine, beer and spirits over the Christmas and New Year period, producers say consumers are having to pay unnecessarily high prices because of exorbitant tax rates.
The call comes amid a rapid increase in the number of operators in Australia, where there are now more than 300 distillers and hundreds of small breweries accompanying the country's winemakers.
According to producers, taxes on alcohol in Australia are among the highest in the world, with much of the burden skewed towards higher-value products.
Under current arrangements, wine is taxed based on the value of the product sold rather than its volume, meaning more expensive wine attracted a higher tax bill.
For distillers of spirits such as gin or whisky, an excise of about $85 is applied for every litre of pure alcohol produced, equating to more than $1 per shot.
Beer is similarly taxed via an excise, although packaged beers are subject to a rate about 40 per cent higher than draught beer.
Both spirits and beer are subject to CPI-linked price increases that reset every six months, meaning actual prices rise faster than inflation.
Cameron Syme, who founded the Great Southern Distilling Company in Western Australia, said the system was a major impediment to growth.
Mr Syme said Australia's alcohol tax rates were uncompetitive internationally.
"In dollar terms for us, we pay this year about $1.4 million in excise to the Commonwealth Government," Mr Syme said.
"If we were in New Zealand, we'd be paying about $500,000, if we were in America, we'd be paying about $35,000.
"It means that Australian whisky is some of the most expensive whisky in the world, particularly when you're buying it domestically.
"So, from that point of view, it's a disincentive to investing in the business.
"If we weren't paying that money to the Commonwealth Government, we would actually be reinvesting it into the business, we would be employing more staff, we would have another four or five working within the company."
No tax changes planned
In a bid to overcome what it says is a model that discourages quality production, industry body Wines of Western Australia is pushing for a shake-up of the tax system.
Earlier this year, Wines of WA revealed it wanted a volume-based tax for wine and would lobby industry participants across the country to canvass support.
Ian 'Duke' Ranson, who owns and runs Duke's Vineyard at the Porongurup Range, almost 400km south of Perth, said small-volume, higher-value producers were disadvantaged by current arrangements.
"If you buy a bottle of our wine, you probably pay $6 tax," Mr Ranson said.
"If you buy the equivalent amount of wine from a supermarket as a cheap wine, you probably pay $1 tax.
"It just seems unfair that our clients should be forced to pay $6 when the clients of the supermarket pay $1."
Federal Treasurer Josh Frydenberg said there were no plans to change Australia's alcohol tax settings.
However, he said the Government was supporting smaller producers by "fast-tracking" the lowering of company taxes to 25 per cent by 2021-22 for firms turning over less than $50 million a year.
The Treasurer also singled out the distilling industry, saying the Government had extended an excise refund scheme in 2017 to provide tax relief.
"Under the scheme, eligible manufacturers of alcoholic beverages can claim a refund of 60 per cent of the excise duty paid on the products," Mr Frydenberg said.
"From 1 July 2019, the cap for this scheme was increased from $30,000 to $100,000.
"The Government is also providing income tax relief to small and medium businesses.
"The Government's changes to the instant asset write-off will also allow small and medium businesses to immediately deduct assets below $30,000.
"This threshold applies on a per-asset basis, so eligible businesses can instantly write off multiple assets."
Domestic price too high
Mr Syme acknowledged the extension of the excise rebate scheme had helped lower costs, but said taxes were still too high.
He said the industry, at a minimum, wanted the Government to reduce the frequency at which the excise on spirits reset from six months to annually, while it was also pushing for a cut to the rate.
"We're an Australian company, we want to be based here," Mr Syme said.
"We're happy to pay our contribution in tax because society needs that. The issue with us is simply the amount of tax we're being expected to pay.
"We would have a standard whisky in America for about $80 a bottle instead of $140 a bottle in Australia, and that includes all the transport costs to get to the US. It's crazy.
"Just think about all the carbon footprint, the fuel miles if you like, on that, on getting it over there, getting it into a different distribution system.
"I think it's crazy that we can send something to the other side of the world and sell it for less than we can here."
Mr Ranson said if the Government's aim in taxing alcohol was to help pay for any of the health and other costs associated with consumption, it made no sense to target higher-value products more heavily.
He said it appeared the Government was more interested in collecting revenue than recovering costs to society.
"I think we probably started with the Rum Rebellion," Mr Ranson said.
"We've always been paying taxes and I think the minute you mention alcohol to a government in Australia, they rub their hands together with glee.
"It seems silly that if you have a drinking problem, and you're going to drink a whole cask of cheap wine, that you pay $1, and you drink a quarter of that of our wine and you pay $6.
"That problem seems an oxymoron to me."