Industry Insights

Local & UK duty hikes for Australian drinks industry

February 1, 2019
By Alana House

Australian drinks companies have been delivered a double whammy with duty rates rising locally and in the UK.

Alcohol excise duty rates will increase in Australia from February 4, 2019.

Excise rates for alcohol are indexed twice a year, in line with the consumer price index (CPI) – in February and August.

The CPI indexation factor for rates from February 4, 2019 is 1.010.

Among the increases are mid-strength beer with an alcohol volume exceeding 3% but not exceeding 3.5%, individual container up to and including 48 litres going from $49.90 to $50.40 per litre of alcohol; and spirits and other excisable beverages exceeding 10% by volume of alcohol rising from $84.51 to $85.36 per litre of alcohol.

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Four Pillars gin co-founder Stuart Gregor recently noted to The Sydney Morning Herald: “Excise tax unfairly penalises the spirit industry. The government is addicted to the excise they get from spirits. Every single review of the tax system has said the alcohol industry ought to be taxed on a per drink basis.
 
“It’s completely crazy that tax on Australian spirits continues to be increased twice each year, the result of which greatly affects potential employment and tourism, promotes imported products over home-made, and makes exporting our goods almost unviable,” Gregor says.
 
“Our gin, by the very nature of the excise tax means we have to be a luxury good, so we have to have a natural ceiling on our market share determined by price.
 
“The reality is that people are punished and have to pay more because they like spirits more than wine.”

 

Bad news for winemakers exporting to the UK

But winemakers are also suffering, with the price of wine rising in the UK today, following a government’s decision that wine duties will now link with inflation.

The new tax will add around 7p per bottle onto the price of a bottle of wine.

The UK duty on still wine will be £2.23 a bottle plus VAT (£2.68), up from £2.16 (£2.60 inc VAT), while sparkling wine duty increases from £2.77 to £2.86 (£3.43 inc VAT).

However, taxes on beer, cider and spirits have been frozen to support British pubs, saving an average of 2p on every pint of beer, 1p on a pint of cider, and 30p on a 70cl bottle of whisky.

Last month, UK MPs were told that this system was being viewed as a “provocative” move by wine exporters such as Australia. The UK is Australia’s largest wine market by volume. 

The Wine & Spirit Trade Assocation’s (WSTA) European and International affairs director Simon Stannard warned the Commons international trade select committee earlier this week that the decision to single out wine for a tax increase had upset Australian producers, who viewed it as favouring domestic beers and spirits over imported wine.

“We know it’s gone down very badly in Australia in terms of setting the mood for future trade relations if one of Australia’s major agricultural exports is being seen to be treated unfairly,” he told MPs.

  

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