Australian Tax on Wine

Business Submission – Australian Tax on Wine

With the Australian government seeking to impose additional taxation upon the use and sale of wine, there have been many outcries of indignation arguing how this would affect the Australian wine industry, and eventually the Australian economy. However, what needs to be considered are the consequences and the public cost of continuing with the discounted taxation to which wine makers in Australia are currently subjected to. The effect on the Australian GDP needs to be taken in to account with the harms that alcoholism in the increasingly youth population is set to unleash, if made available readily and at subsidized prices.

The risks and problems that have arose from the increased alcohol consumption by the Australian public in recent years, especially the young generation, point towards a possible increase in the health deterioration of most Australians while also impacting the economy in an adverse manner. As it is a proven fact that the consumption of alcohol is, in fact, a vice in the society that can create havoc over a nation if its power, consumption and authority are not brought under increased control. Although the consumption of alcohol is witnessed in almost most cultures of the world, this problem has left evidence and support for the Australian community that acts as a support for the fact that the consumption of alcohol should be reduced by acting in an efficient manner, without creating uproar amongst the members of the public. The toll for deaths caused as a result of alcoholism in Australia in 2009 peaked to 60 members of the society per week (Shepherd, 2009). I am a political lobbyist hired by the Australian National Preventive Health Agency in order to advocate the imposition of taxation on wine, which will as a result increase the prices of cased wine, beer and other spirits to reduce the implications caused by excessive alcoholism in the country.

Background Information of the Australian National Preventive Health Agency

The Australian National Preventive Health Agency was established in 2011 and operates with the slogan, ‘Promoting a Healthy Australia’, in line with the Australian National Preventive Health Agency Act of 2010, in order to instigate national policies regarding preventative health measures. It strives to create a healthier Australia, where any possible health issues might be tackled first hand by the use of preventive methods as precaution. The government of Australia established this agency so that the infrastructure and the investment in the preventive health care system in the country can be made strong and more awareness can be created amongst the masses for the need to stay preventive in terms of health problems (Government, 2011). The agency has its strategic goals and the mission statement set out based on the Australian National Preventive Health Agency Act of 2010. Within the scope of those goals, the agency intends to promote and assist the government in establishing preventive health care public policies on a national level., while also reducing the risk of possible loss of health by running advice and leadership programs in relation to the preventive health care, spreading more knowledge regarding the important health issue and guiding towards maintaining a healthy lifestyle in order to avoid any health issues in the future. The agency also aims to aid in the gathering of statistical data regarding the health issues and concerns throughout the country and make such data and reports available readily for all members of the country. Therefore, the policies that this agency promotes and presents to the government target the promotion of avoidance and prevention of any issues in the society that can lead to adverse health problems in the future.

The Problem

After tobacco, alcohol is the most used drug in the whole world. Increased consumption can lead to health problems, such as chronic diseases like kidney diseases, cardiovascular problems, cancer, diabetes, obesity and high blood pressure, for an individual and can also easily result in developing serious issues and problems that require hospitalization and in an increasing number of cases, also result in deaths (Sturm, 2002). The main issue that lies in the Australian system is again an increase in alcohol consumption by people of all ages. When studied in detail, the statistics can prove to be astonishing. According to statistics, Australians are considered to consume a very high level of alcohol as compared to various alcohol consuming nations and are known to drink on a frequent basis. In a study from 2007, it was revealed that the Australian nationals over the age of 15 had a per capital consumption of 10 liters of alcohol (NPHT, 2008). Moreover, the consumption of alcohol in terms of age revealed an increase as age increased, where Australians over the age of 60 were reported to be the most frequent and high level consumers of alcohol. Although one of the leading developing nations of the world who are on the forefront of every global development, the Australian nation has pushed itself towards increased harm at the hands of high levels of alcohol consumption. And this has been primarily possible due to the pricing of the alcoholic beverages in Australia and the subsidies and levies of tax available to its producers, distributors and consumers throughout the country. Alcohol has become a luxury that is accessible to every status level of the Australian society and thus, with a lower price, the demand for alcoholic beverages remains high just like any luxury item. However, in recent years, the government has been reluctant in increasing the prices of wine and other alcoholic beverages in the country due to the adverse affect that will result on the wine and grape industry in the country. Moreover, those associated with the wine industry have shown anger and reluctance towards the ideas of the government to impose an increased tax on the pricing.

Developments to Date

When all alcoholic products that are available in Australia are compared in terms of pricing and taxation, we become aware of the facts that the taxation on the prices of wine is one of the lowest comparatively and while other alcoholic beverages such as beers and spirits are charged tax based on the volume level of alcohol present in the drinks, wine is given a special treatment by the government as it is taxed like other common commodities on the wholesale price of the drink. Additionally, there exists a rebate for wine producers to an extent of $1.7million from wine sales, which provides increased tax exemption to most small wine producers in the country. Wine is the leading alcoholic beverage consumed in the country as it is part of the formal as well as the informal drinking culture of the country. Thus, it has not been easy for the government to impose high taxes on its pricing. In 1970, an excise duty tax of 50 cents per gallon was imposed on wine. However, this proved to be infamous for the government, and was reversed back in 1972. Subsequently, the goods and services tax (GST) of 10% was introduced in 2000 on the prices of wine (Anderson, 2010). This tax has remained a part of the price of wine in the country till date, and since it is comparatively low, the consumption of wine has shown an increase in recent years. In 2009, the Henry Review Panel, which was setup by the government to review upon the pricing and taxation system of the government, submitted its report which included several recommendations pertaining to the taxation of wine (Henry, 2009). Although, in its reply to the report, the government mentioned that it was willing to place higher taxes on wine in the future, it avoided placing any taxes based on the recommendations immediately (Swan & Rudd, 2010).

Proposed Solution

As a representative of the Australian National Preventive Health Agency, the proposal that would be presented here would be in the light of the mission and goals of the agency and the Australian National Preventive Health Act of 2010. As stated earlier, the problems that are related to alcohol consumption are too high and must be dealt with in proper manner by the government of Australia. One such method is to reform the prevailing alcohol taxation system in the country. These reforms must change the current wholesale tax wine into a volumetric-based tax, where level of wine in a bottle must be the key assessor of the price of wine. This would increase the current prices of wine and could thus result in a decrease in demand. To counter the problem of affecting the wine and grape industry adversely, the government should promote the exports of wine to other countries by subsidizing tax on export, reducing custom duties, and allowing the manufactures of wine in the country to reduce prices of wine that is exported in order to attract importers. Moreover the prevalent method of the Australian government to adjust the excise duty tax on wine based on the Consumer Price Index (CPI) every six months must be continued to ensure the prices of these beverages do not fall down to a level where it becomes affordable and cheap for the Australians.

Evidence in Support of Proposed Solution, Counter Arguments and Responses

There lie huge amounts of support for the proposed solutions to decrease the consumption of alcohol in Australia. Firstly, the World Health Organization itself recognizes the fact that control over the consumption of alcoholic beverages such as wine can be maintained by using an effective alcohol taxation policy system (WHO, 2007). Secondly, with the Australian wine industry being old and vast, it has potential to produce good quality wine and export most of its products as there is a high demand for Australian wines across the globe, which is evident from the fact that Australia is the fourth largest exporter of wine (ABS, 2013). The arguments against the proposed solutions are primarily built up by the consumers of wine who would naturally not support the proposals. They present the ideas that the Australian National Preventive Health Agency, an agency established by the government is an ‘anti-development radical environmental activists’ organization who is utilizing the taxpayers’ money for personal gains (Andrews, 2013). However, such claims can easily be falsified and are only being created so that the frequent drinkers in the country are not stopped from their regular consumption levels, which would eventually grow to catastrophic levels.

Conclusion

Alcohol has proven to result in many domestic problems for individuals and the society on national level. Therefore, the negative side of the consumption of alcoholic beverages, such as wine and beer, sheds light on the problems that arise from this. The health of a person is a major thing that is affected by alcoholic consumption, and thus requires individuals to prevent or decrease the consumption levels. However, like every other drug, alcohol is difficult to quit or decrease, and in case of Australia where consumption is one of the highest in the world, it is near to impossible for majority of the Australian public to protect their health and prevent any health problems to arise from high consumption. Therefore, it lies in the hands of the Australian government to reduce the alarmingly high levels of consumptions in Australia. Imposing high taxes is one of the most effective methods as it increases the prices, making wines and beers expensive for consumers, and thus decreasing the demand of these drinks drastically.

Bibliography

ABS. (2013, February 22). Australian Wine and Grape Industry, 2011-12. Retrieved from Australian Bureau of Statistics: http://www.abs.gov.au/ausstats/[email protected]/mf/1329.0

Anderson, K. (2010, May). Reforming taxes on wine and other alcoholic beverage consumption. Wine Economics Research Centre Working Paper No. 0810 . Australia: University of Adelaide.

Andrews, T. (2013). Stop the wine Supertax! Retrieved from Australian Taxpayers’ Alliance: https://www.taxpayers.org.au/nowinesupertax/

Government, A. (2011). Australian National Preventive Health Agency. Retrieved from australia.gov.au: http://australia.gov.au/directories/australia/anpha

Henry, K. (2009, December). Australia’s Future Tax System: Report to the Treasurer (The Henry Review). Retrieved from The Treasury (Australian Government): http://www.taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm

NPHT. (2008). echnical Report No. 3: Preventing Alcohol-related Harm in Australia: a window of opportunity. Commonwealth of Australia: National Preventative Health Taskforce.

Shepherd, T. (2009, September 23). Alcohol killing 60 Australians each week. Retrieved from The Advertiser: http://www.adelaidenow.com.au/news/alcohol-killing-60-australians-each-week/story-e6freo8c-1225778355667

Sturm, R. (2002). The Effects Of Obesity, Smoking, And Drinking On Medical Problems And Costs. Health Affairs (vol. 21 no. 2), 245-253.

Swan, W., & Rudd, K. (2010, May 2). Stronger, Fairer, Simpler: A Tax Plan for Our Future. Retrieved from Joint Media Release No. 028, The Treasiry (Australian Governement): http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/028.htm&pageID=003&min=wms&Year=&DocType=

WHO. (2007). WHO expert committee on problems related to alcohol consumption, second report. Technical Report Series no. 944. Geneva: World Health Organization.