Australia: Increasing alcohol tax best way to fix budget deficit, says report

Economic modelling finds 10% hike in alcohol excise and scrapping of the wine equalisation tax would raise $2.9bn a year

Source: The Guardian

7 March 2016

Increasing the price of alcohol, particularly cheap wine and cider, would boost tax revenue by $2.9bn annually and be a boon to public health, says a new report.

The economic modelling found that a 10% hike in all alcohol excise and the scrapping of the wine equalisation tax (WET) would lead to a 9.4% cut in booze consumption and a corresponding cut in alcohol harms.

The extra tax revenue could be spent in the health system targeting chronic disease prevention and research, says the Foundation for Alcohol Research and Education (FARE).

Its Pre-Budget Submission 2016-17 proposal would see wine and cider taxed according to the volume of alcohol, as applies to beer and spirits, before a 10% increase is applied on all alcohol excise.

The WET sees cheap wine and cider taxed at a lower rate than beer and spirits.

But wine currently makes up 40% of all pure alcohol consumed while only delivering 15% of alcohol tax.

Replacing it with a volumetric tax would ensure it paid its share of the resulting alcohol harms, says FARE.

“Reforming the alcohol tax system should be a no-brainer,” says FARE’s chief executive, Michael Thorn.

“In fact nine separate government reviews have recommended we do exactly that.

“Increasing taxes on alcohol would not only address the budget deficit but, as research shows, is also the most cost-effective way to reduce alcohol consumption and the resulting harms, particularly among young people and risky drinkers.”

Each day, 15 Australians die and 430 are hospitalised because of alcohol, while other far-reaching effects include family violence and foetal alcohol spectrum disorders, says FARE.

AVERAGE INCREASES UNDER PROPOSALS

    $5.25 for bottle of wine currently under $7

    $4.60 for $7-$15 bottle of wine

    $3.80 for $15-$20 bottle of wine

    5.5 cents for a schooner of full-strength draught beer

    16.7 per cent for a can of pre-mixed spirits