The twice-yearly excise increase is not only bad for small businesses but could lead to organised crime eyeing another deadly black market, writes Andy Young
Earlier this month the Prime Minister announced that the Government would freeze the excise on draught beer, calling it “a commonsense measure”. What that means is that the twice-yearly excise increase, that is based on the upward movement of the consumer price index (CPI), remains in force for spirits and packaged beer.
The CPI indexation factor for rates from 3 February was 1.004, putting the current excise on beverages exceeding 10 per cent by volume of alcohol at $104.31 per litre of alcohol.
This will increase again on Monday, 4 August, then again in February 2026, August 2026, February 2027, August 2027 and so on, and so on.
This policy of twice-yearly automatic excise indexation was introduced by Paul Keating in his first Budget as Treasurer back in 1983.
At the time Keating said: “The new system will afford a greater degree of stability for consumers and industry alike.
“These traditional excises will rise gradually in line with inflation and as wages and other incomes themselves increase.”
Since that Budget, the ‘gradual increase’ of excise has brought 76 tax hikes and has put Australian spirits tax up to the third-highest in the world – behind, but very close to, Iceland and Norway.
There is no plan in place to freeze, let alone reduce, the excise increases on spirits tax and we are moving towards a point where spirits will be taxed beyond the means of many ordinary Australians. And what does that mean? It means people will look for cheaper alternatives, and that is a very dangerous proposition, because that situation usually sees organised crime recognise an opportunity to make money.
And you can guarantee that if they are looking to make a buck organised crime will not care about what goes into those spirits – methanol and all!
Don’t think that is possible?
The Australian Government’s position on cigarette excise has been to put it so high that the inhibitive cost will force people stop smoking. Many people may have stopped smoking because of the high cost – which is obviously a good thing – but many haven’t and now black market cigarettes are a massive problem across Australia.
A recent investigation by 60 Minutes, The Age and Sydney Morning Herald, put a value on the cigarette black market of $5bn a year, or $13.7m a day. Hundreds of shops across the country have been firebombed and destroyed as criminals look to take control of this massive money-making machine.
The Federal Government said it has given $188.5m to the Australian Border Force to help end the trade of illicit tobacco.
That Nine Network investigation also heard from law enforcement officers, who are on the frontline of the fight against illicit tobacco, and they were calling on the Government to help fight this multi-billion-dollar black market by reducing the tax on cigarettes – take away the need for the black market.
But all the Government sees is the excise dollars coming in, so why change anything?
Helping small businesses?
When the Prime Minister announced the excise freeze on draught beer he said: “My Government is building Australia’s future and to do that we need to support our small and medium local businesses to thrive.”
The PM says he wants to help small and medium local businesses to thrive, but in Australia over 80 per cent of draught beer taps pour beer from the Japanese multinationals that own Lion and Carlton & United Breweries.
Many Australian craft brewers are going into voluntary administration because of the challenging market conditions. Australia has a wonderfully diverse spirits industry that is full of the small and medium local businesses that the PM claims he wants to help.
But he is not helping them, he is stifling them by hitting them with a tax increase every six months.
Some distillers have told me that they don’t pass on the tax increases because the consumer simply assumes they are trying to make more money – but doing that means they can’t afford to take on new staff. Is that supporting small business?
Some distillers have told me they can ship their spirit to America, get it distributed into a store and still sell it for less than they can here? Is that helping small business thrive?
For many producers spirits tax comprises over 60 per cent of the cost of a bottle. Is that a commonsense measure?
No. No. No.
This continual excise increase on spirits is a very dangerous Federal Government policy and one that needs to change sooner rather than later, otherwise the claims of wanting to help small business are vacuous and organised crime will be eyeing another deadly black market.
