Alcohol Tax Increase: Industry Warns Of Rising Costs For Consumers

Australia's spirits industry is urging the government to eliminate outdated tax increases that will leave an adverse impact on both producers and consumers, as the sector continues to grapple with the cost-of-living crisis.

The call came as the government was set to implement a hike in the alcohol excise tax to AU$104.31 per liter of alcohol, up from AU$103.89 -- marking the 84th increase since its introduction in 1983. The hike will come into effect on Monday, News.com.au reported.

Alcohol-related excise tax rates will rise starting on Feb. 3, 2025. This upgrade is part of a normal indexation process based on the consumer price index (CPI) that takes place every six months. This increase's current indexation factor, which takes into account the most recent CPI data released on Jan. 29, is 1.004, per a report by the Australian Taxation Office.

While the tax on beer varies based on its alcohol content, spirits face a uniform rate that only shows an upward trend, raising concerns among producers and consumers alike about the impact on prices and affordability in the current economic climate.

"Beer and spirits excise is a dripping tap which delivers AU$6.2bn of drinkers' money to Canberra already – and is budgeted to go up another AU$800m by 2027," Australian Hotels Association chief executive Stephen Ferguson said. "That's money out of people's pockets who can't afford it. Everyone knows a dripping tap should be turned off."

"That's what we want to see, a fair go for the men and women who enjoy a beer or gin and tonic at their local pub – not a hidden tax designed to increase by small amounts that goes up twice a year. These are the places where jobs are actually created – and they are the heart of their communities."

"The latest tax increase, which takes Australia's spirits excise to AU$104.31 per liter of alcohol, will make it more expensive for consumers, more expensive for producers, and less competitive for spirits exporters," he said.

Leveraging Labor's election campaign theme of "building Australia's future," Paul McLeay, the chief executive of the Australian Distillers Association, highlighted how the existing excise duty was impeding the sector's ability to grow and export.

He maintained that freezing the duty would help distillers increase their capacity for domestic manufacturing, which in turn would result in the creation of jobs in the sector, in addition to being in line with the government's goals for trade diversification.