The debate about the “alcopops” tax situation shows, in stark terms, how distorted our alcohol taxation system actually is. The current taxation system is riddled with loop holes due to backroom agreements between industry and government designed to boost the liquor industry.
As a consequence the system encourages substitution of alcoholic products based on price whereby people switch to alcohol that is only cheaper because there is less tax on it. This clearly demonstrates that taxation can be used as a lever to effect how people consume alcohol and, on the flipside, to reduce consumption. The time is ripe to look at dismantling these deals by removing all cost benefits of substitution and is achievable with the introduction of volumetric taxation.
Put simply, volumetric taxation is when the tax is calculated based on the pure alcohol content in the beverage or package. It differs from the current taxation model which taxes beer, wine and spirits at different rates, often as a result of “sweetheart” deals between industry and government.
New research released last week (July 31) titled ACE-Alcohol, funded by the Alcohol Education & Rehabilitation (AER) Foundation and led by Associate Professor Christopher Doran from the National Drug and Alcohol Research Centre and Associate Professor Theo Vos from the University of Queensland, costs and compares the impact of a range of interventions designed to reduce excess alcohol consumption and the cost burden of associated diseases.
The tax increase for RTD’s or “alcopops” introduced by the Rudd Government ensures that the spirits in the pre-mixed drinks are taxed at the same rate as spirits when sold straight. No one, including the Government, is suggesting this is the extent of the effort needed but it does tackle two important issues. In closing this tax loophole, so no further exploitation can take place, the Rudd Government have taken an important first step towards volumetric taxation.
The latest announcement by the Liquor Merchants Association of Australia states that while there was a 30 per cent fall in the volume of ready-to-drink alcohol sold between April and June, sales of full-strength bottled spirits over the same period increased by 46 per cent. Yes, the data is selective and self serving, but the elephant in the room here that has yet to be addressed, is that no one has evidence as to who is drinking these spirits.
On the first announcement of the RTD tax hike, the Spirits industry claimed that the majority of people who drink these products were men over 25 (and up to 45), so the tax measure would be ineffective in combating risky drinking in Australia’s young people. How can they now legitimately claim that young people, women in particular, are switching from RTD’s to hard spirits?
It is just as likely that, if the sales in bottled spirits have increased, the people who are drinking these spirits are men over the age of 25 years, not young people. There are anecdotal reports that bottle shops are giving away 2lt bottles of coke with every bottle of spirits purchased, which indicates that the sales of dark spirit are increasing, a product most commonly consumed by men. Furthermore it suggests that people in this age bracket are more price sensitive than their younger counterparts who are more readily influenced by convenience, advertising, portability, peer pressure, a known measure of alcohol, less likelihood of drink spiking, and for women, white spirits.
What this highlights is the fact that the alcohol taxation system is broken. It does not achieve anything other than a revenue stream for government. I have no doubt that governments need to maintain revenue, but if we looked at the alcohol taxation system from a public health perspective, as well as from an economic perspective, then I think we could come up with a much better system that would serve Australia equally well in both areas.
This has to be fixed. The Henry Commission of Inquiry into the taxation system, which includes an examination of alcohol excise, is the correct place for this situation to be accurately and fairly assessed. The public health sector will be making a submission to the Henry commission and the ACE-Alcohol report will form part of this, to present the case for volumetric taxation the most sustainable, cost effective solution. Australia needs to tax alcohol as alcohol, not whether it is in the form of beer, or wine, or spirits.
If we are serious about reducing the $15.3 billion burden of harm associated with risky drinking then a comprehensive suite of measures needs to be employed to bring about lasting change. As the ACE-Alcohol report demonstrates, when volumetric taxation is combined with licensing controls, restrictions on advertising, labelling of products and a public education campaign; we will begin to see a change for the better in Australia’s risky drinking culture.