Why Aussie spirits don’t stand ghost of a chance against our killer taxes

Australia’s complex and outdated alcohol tax system has been a problem for decades. And like most problems that are not dealt with, it just keeps getting worse.

It’s easy to think the problem today is the same as it was almost 15 years ago when the Henry Tax Review described Australia’s complicated patchwork of varying alcohol taxes as “contradictory” and “incoherent”.

But it is not. Two seismic shifts have taken place since this review that make the case for spirits tax reform especially urgent.

The first is how much that tax has grown in the years that have passed. The second, is who that tax is punishing.

In 2014, there were only 28 distilleries operating across the country. That number is now closer to 600.

This rapid growth has given rise to a new wave of household names – think Four Pillars Gin, Starward, Archie Rose and Lark Whisky. These businesses have built on the legacy and reputation of global spirits brands to create distinctly Australian expressions of gin, whisky and rum, which have deservedly won international acclaim. These manufacturing businesses are what we need more, not less of in Australia to turbocharge productivity.

Australia has the third highest spirits tax in the world, and this presents a real challenge for all distillers who are trying to balance this with their ambition to invest in and grow their businesses.

How can a small, local distillery fathom overseas exports when the economics of their business at home are so hard? How will they attract the kind of investment needed to scale their businesses to compete on the world stage, when comparable markets have more favourable tax settings?

Spirits producers are not against paying our fair share of tax. But as excise tips over $100 per litre of alcohol, adding to the $5 billion in spirits tax revenue the government collected from our industry last year, it’s right to ask when is enough, enough?

For too long successive federal governments have seen the spirits industry as a tax revenue stream rather than a creative domestic manufacturing industry with all the hallmarks of following in the footsteps of our proud wine industry and becoming the next great Australian export powerhouse.

On the one hand, the current federal government has prioritised domestic manufacturing as a key pillar of our economy. On the other, their policy settings for spirits production don’t encourage us to be part of that vision for Australia.

That’s why we need the government to freeze the spirits tax to unleash the potential of the Australian spirits industry. This will give producers the confidence to reinvest in their business, to create jobs, and develop their export potential. It will be good for the industry, good for local jobs, and good for the Australian economy.

Paul McLeay is chief executive of the Australian Distillers Association