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.
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[14]
Some of the relationships vary with the type of damage. While bottled wine is linked to a moderate to high probability of drink-driving, it is also linked to a low probability of hazardous, disturbing or abusive behaviours.
Pre-mixed spirits in a bottle are related to a low probability of both drink driving and hazardous, disturbing and abusive behaviours. But when account is taken of the gender of the drinkers (so-called alcopops are typically drunk by females), we find them no longer as safe.
Probability of hazardous, disturbing or abusive behaviour
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)
