AUS
NZ
UK
CA
USA
IND
Highlights
- Rising alcohol taxes put pressure on beer and spirits prices.
- Australian spirits tax is one of the highest globally.
- Industry calls for a freeze and a review of the tax system.
Australia’s alcohol industry, especially beer and spirits, is feeling the pressure as taxes on alcoholic beverages continue to rise, impacting both production and consumer prices. The government’s decision to index alcohol excise duty to inflation in 1983 set the stage for consistent tax increases twice a year, usually in February and August. The latest hike of 0.4% on February 3 has sparked concern within the hospitality sector, which is still recovering from the pandemic. The tax increase is forcing brewers and pubs to raise prices, creating a difficult environment for an already struggling industry.
Australia’s spirits tax is now the third highest in the world, trailing only Finland and Norway. With spirits tax rates in Australia seven times higher than in the United States, producers have voiced concerns over the strain on their businesses. Companies like (ASX:SDA) Australian Distillers Association have raised alarm over how the excise system is limiting the growth of exports. With half of Australia’s 700 spirits manufacturers located in regional areas, the tax system could hinder their ability to compete on a global scale.
Furthermore, the hospitality industry, particularly pubs, bars, and restaurants, is seeing an alarming increase in business failures, with a recent CreditorWatch report noting an 8.5% failure rate. This is significantly higher than the national average of 5.04%. Rising tax rates are only adding to this strain, particularly as inflation increases the cost of goods and services across the board.
Treasurer Jim Chalmers has expressed his commitment to monitoring price inflation, calling on the Australian Competition and Consumer Commission (ACCC) to ensure that retailers don’t exploit the recent tax hikes to unfairly raise prices. However, despite this assurance, industry figures argue that even small increases add up over time. As Amanda Lampe, Chair of Bundaberg Distilling Company (ASX:BDA), pointed out, taxes account for 63% of the cost of a bottle of Bundaberg rum, making it difficult for consumers and producers alike.
With these issues mounting, many in the industry are calling for a freeze on excise duty increases and a broader review of Australia’s alcohol tax system, which currently levies harsher taxes on beer compared to wine. If left unaddressed, high taxes and inflation could continue to damage Australia’s beer and spirits industries, reducing both consumer access and export opportunities.
In the coming months, the industry’s survival may depend on whether the government takes action to relieve the tax burden or if further tax hikes continue to escalate.
