Tue Apr 11

Australia's system of taxing alcohol is 'incoherent', but our research suggests a single tax rate isn't the answer

Written by Ou Yang, Research Fellow, The University of Melbourne

The best word to describe the way Australia taxes alcoholic drinks is “incoherent ^[1]”.

It was the word used by the 2010 Henry Tax Review ^[2] to describe a system ^[3] in which some wine effectively faces no alcohol tax ^[4], expensive wine is taxed heavily and cask wine lightly, beer (but not wine) is taxed by alcohol content, brandy ^[5] is taxed less than other spirits, and cider ^[6] is taxed differently to beer.

Industry calculations suggest cask wine is taxed at as little as six cents ^[7] per standard drink, mid-price wine at 26 cents, bottled beer at 56 cents, and spirits at $1.24.

Australian Distillers Association ^[8] And yet it is cask wine that is often said to do the most damage ^[9]. The Henry Review recommended taxing all drinks containing more than a small amount of alcohol at the same rate ^[10] per unit of alcohol, regardless of type. It was a recommendation backed by specialists in Australia’s tax system ^[11]. Implicit, and largely unexamined, in these recommendations is the assumption that alcohol does the same damage in whatever form it is taken. Our new study ^[12], linking drinkers’ risky behaviours to the types of alcoholic beverages they mostly consume, finds this isn’t so. Using data from six waves of an Australian recreational drug survey ^[13], we find that regular-strength beer and pre-mixed spirits in a can rank among the highest in their links to both drink-driving and hazardous, disturbing or abusive behaviours. Mid-range are mid-strength beer, cask wine, and bottled spirits and liqueurs. At the bottom are low-strength beer and pre-mixed spirits in a bottle, which have the weakest links to risky and abusive behaviours when intoxicated. Probability of drink driving, by age and beverage type

RSB = Regular-Strength Beer; LSB = Low-Strength Beer; MSB = Mid-Strength Beer; BW = Bottled Wine; FW = Fortified Wine; CW = Cask Wine; PMSC = Pre-Mixed Spirits in a Can; PMSB = Pre-Mixed Spirits in a Bottle; BS = Bottled Spirits and Liqueurs. Source: Economic Record ^[15] Our study suggests that Australia’s haphazard system of taxing alcohol might have got some things right. Beer, which is typically taxed more highly than wine, seems to do more damage. But it has got some things wrong. Cask wine appears to be significantly undertaxed relative to the damage it does. More broadly, our findings suggest that if alcohol is to be taxed according to the damage it does, the tax system we adopt will need to be more complicated than a single rate for every unit of alcohol regardless of the form in which it comes. References^{^} incoherent (cdn.theconversation.com)^{^} Henry Tax Review (cdn.theconversation.com)^{^} system (www.aph.gov.au)^{^} no alcohol tax (www.ato.gov.au)^{^} brandy (www.thespiritsbusiness.com)^{^} cider (www.cideraustralia.org.au)^{^} six cents (australiandistillers.org.au)^{^} Australian Distillers Association (australiandistillers.org.au)^{^} do the most damage (www.news.com.au)^{^} same rate (cdn.theconversation.com)^{^} Australia’s tax system (doi.org)^{^} new study (doi.org)^{^} Australian recreational drug survey (www.aihw.gov.au)^{^} Source: Economic Record (onlinelibrary.wiley.com)^{^} Source: Economic Record (onlinelibrary.wiley.com)Authors: Ou Yang, Research Fellow, The University of Melbourne