Diageo renews call to tax alcohol content

Spirits giant Diageo has joined the push to tax beverages on their alcohol content, saying the existing regime unfairly hits spirits while allowing the market to be flooded with cheap cask wine.

Tim Salt, managing director of Diageo Australia, said the company would urge the government to include alcohol in its forthcoming review of the tax system. "We have been pushing for this for a number of years following the past Labor government's so-called alcopop tax," he said.

Labor increased the excise on spirit-based ready-to-drink products in 2008 by 69 per cent in response to community concerns about underage drinking -- a move the industry says simply shifted customers to beer, wine and bottled spirits.

"If you are looking for bang for your buck in alcohol, you go for cask wine, you don't even touch spirits," Mr Salt said.

Diageo, which is based in Britain, has a portfolio of top-selling spirits brands, including Johnnie Walker scotch, Smirnoff vodka and Tanqueray gin, and in Australia owns Bundaberg rum.

At the top of the company's wish-list is a shift to volumetric taxation for all types of alcohol, which was recommended by the Henry tax review in 2009 but has failed to win political support.

The existing tax system uses volumetric tax for beer and spirits but a price-based "wine equalisation tax" for wine and cider, which means cheap wine attracts very little tax regardless of its alcohol content.

Under the current regime, a standard drink of spirits, either straight or pre-mixed, attracts tax of 98c, while a four-litre cask costing $11 is taxed at just 8c per standard drink.

"Alcohol is alcohol, and should be taxed as such -- we have 20 different tax categories for alcohol in Australia, and other than Sweden, we have the highest tax rates on spirits in the world," Mr Salt said.

Calls to move to standard volumetric taxation across all alcohol categories have in the past been rejected on the grounds that they would lower the price of luxury wines while making cheap wines more expensive, potentially wiping out much of the domestic wine industry.

Mr Salt said he agreed with Jean-Christophe Coutures, chief executive of Pernod Ricard's wine division Premium Wine Brands, who last month called for volumetric taxation on wine but said affected winemakers and grape growers should be compensated for any loss.

While he didn't expect the government to do anything to lower the price of spirits, he said they should at least scrap the twice-annual increases in excise in line with the Consumer Price Index measure of inflation.

"It will get to the stage where we think it's hard to justify investing in brands and capital in Australia -- as consumption has been declining, the relative cost of doing business becomes exorbitant," he said. "But if we halt the CPI increases, and couple that with changes to the way wine is taxed, it would be a more even playing field."

Source: The Australian, 29 October 2013