Cocktail prices to rise as government prepares to hike alcohol tax

Drinkers are facing another hike to the cost of spirits with the alcohol tax set to rise again.

Drinkers are facing another hike to the cost of spirits with the alcohol tax set to rise again. Photo: AAP

Australians are facing even higher prices for cocktails and other spirit-based beverages as the federal government hikes taxes again this week.

A controversial excise on spirits will reach $100 a litre under the latest twice-annual inflation indexation of the tax in a move the industry warns will end up hurting consumers nationwide.

Australians are now paying the third-highest alcohol tax rates in the world, while the recent inflation wave has pushed up the excise to levels that weren’t previously slated until 2029.

Paul McLeay, chief of the Australian Distillers Association, said the rate of tax is long past fair for the industry and will end up hurting consumers at the shops amid the cost-of-living crisis.

“The average price of a bottle of gin is $70 – half of that is now going to the tax office,” he said.

“In the long term all costs are passed on to the consumer.”

Tax rises more than 7 per cent in two years

The upcoming Consumer Price Index (CPI) indexation of the alcohol excise on spirits follows steep increases of 3.7 per cent in February and 4.1 per cent over the course of 2022.

The government and health advocates argue such high taxes are needed to offset the social and health costs of alcohol consumption, but the industry says tax is now so high that local distilleries are struggling to invest.

“This tax is unfair and unsustainable,” Mr McLeay said. “It means Australian businesses don’t have the money to reinvest.”

Mr McLeay wants the federal government to freeze the tax indefinitely until the economy is in stronger shape and businesses have had enough time to build out their local operations.

He said the 600 or so Australian-based distilleries are mainly small and medium businesses located in regional areas, meaning higher tax rates were putting manufacturing jobs at risk.

“Transport, packaging and all these other costs are going up – tax is the only lever the federal government has,” he said.

“Just give us a break and freeze it.”

That’s unlikely though, with the federal government relishing the billions of dollars in revenue drawn from alcohol excise each year and facing its own spending pressures in coming years.

Australians are also paying relatively high rates of tax on other forms of alcohol, including beer and wine – though the rates for these products are about half that of spirits like whiskey, brandy and vodka.

While Australians stare down $100 per litre spirit taxes, Americans pay only about $10.80 a litre.

Only Ireland, Finland and Sweden charge higher alcohol taxes than Australia in comparative terms.

Health rationale for tax

But there’s a good reason for high alcohol taxes, according to health advocates, who point to international research that suggests higher booze prices reduce alcohol-related harms.

World Health Organisation (WHO) research has found that alcohol prices are one of the most effective ways to limit the harms sparked by alcohol use, whether social or health related.

Rates of alcohol consumption nationwide have been falling in recent years, particularly among younger cohorts of Australians, according to the latest available Australian Bureau of Statistics (ABS) data.

Figures for the 2020-21 financial year show 23.9 per cent of people decreased their booze consumption over the 12-month survey period.

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