Spirited argument as distillers seek urgent tax relief

Australia’s craft distillers have joined with big spirits companies to demand an overhaul of the ‘unfair’ spirits tax, warning it is preventing them from expanding overseas.

PwC modelling on industry proposals to overhaul the spirits tax shows decreasing the rate boosts demand and government revenue.

Australia’s craft distillers have for the first time joined with big spirits companies to demand an overhaul of the “unfair” spirits tax, warning it is preventing them from expanding overseas and is harming their COVID-19 recovery.

Representing 300 distilleries, or about 90 per cent of the industry, the Australian Distillers ­Association and Spirits and Cocktails Australia have recommended cutting the spirits excise rate by $6 — putting it on par with the ­brandy excise rate — and freezing biannual CPI increases on the tax for three years.

Distillers pay $88 of tax per litre of pure alcohol, making it the third highest spirits excise in the world behind Iceland and Norway.

 

“Australia’s out-of-control tax is now so high it is actually suppressing demand, meaning less revenue than if the tax rate was lower,” Spirits and Cocktails Australia chief executive Greg Holland said.

“We know Australian spirits can compete on the world stage and they have the potential to ­become a lucrative export earner. But right now you can buy a bottle of Australian whisky or gin in the US and pay less than you pay here. That’s just crazy.”

Independent modelling by ­accounting firm PwC on the ­industry proposals suggests consumption of spirits would increase if the tax was lowered or frozen, ­increasing government revenue by up to $1.4bn over four years.

The industry groups say the savings created by the “modest tax relief” should be reinvested in ­increasing the excise refund scheme limit for alcohol manufacturers from $100,000 to $350,000 for two years, making it equivalent to the rebate offered to small wine producers under the wine equalisation tax.

Cape Byron Distillery, in the NSW electorate of Richmond held by Labor MP Justine Elliott, estimated it would save $68,000 a year if CPI increases on the spirits tax was frozen. That would allow it to hire an extra salesperson, who could potentially sell a further 840 cases of spirits a year and bring in $600,000 in revenue.

“About two-thirds of Australian distillers are based in rural and regional communities, and after a horror year they urgently need this unfair tax fixed,” ADA president and Four Pillars co-founder Stuart Gregor said.

There were 28 distilleries in Australia in 2014 but that has ballooned to 300 today.