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Australian Tax on Alcopops

The Australian government has placed a special tax on alcopops to combat binge drinking, particularly in young people. Here, Geoff Munro, National Policy Manager of the Australian Drug Foundation, describes the politics of the move, and the outcome.

In April 2008 the Australian Government applied a special excise to premixed spirits, “alcopops” or ready-to-drinks (RTDs). Consequently the tax on the spirits component of RTDs rose by 70%, from A$39.36 to A$66.67 per litre of alcohol, the same rate as for bottled spirits. The tax, that the government said was aimed at countering binge drinking by adolescent females, added about A$1.30 to the price of a single RTD bottle or can. Premixed spirits are the fastest growing segment of the alcohol market in Australia and are implicated in dangerous drinking by young people. Spirits industry sources say RTDs expanded by 36% over four years (1). Sixty per cent of female drinkers aged 15- 17 consumed an RTD in 2007 compared to 14% in 2000(2) and unpublished official data showed RTDs are consumed by over 70% of male and female teenagers who drink at the highest risk of immediate harm(3).

As the government lacks a majority in the Senate, and the tax was opposed by the conservative parties, the issue turned into a cause celebre amidst intense media interest. An alarmed spirits sector, led by the Distilled Spirits Industry Council of Australia (DSICA) campaigned vociferously against the measure. The campaign included a stream of media releases, a dedicated website, mobile billboards, and the feeding of “anti-tax” and “antiwowser” stories to sympathetic journalists and talkback radio hosts. A senior journalist told the author the force of the industry’s lobbying effort was unprecedented in his experience. Health advocates tried to counter by disseminating accurate information about the known impact of the tax (see below), critiquing the spirits industry’s erroneous arguments and publishing statements of support for the added excise.

Alcopops sales declined by 29% between May 2008-January 2009, equivalent to a reduction of 310 million standard drinks in the RTD format while spirits and beer sales increased by a combined 160 million standard drinks, resulting in a net decrease in alcohol sales of 150 million standard drinks over the period(4). It is too early for a definitive judgment, but if adults are primarily responsible for the additional sales of beer and spirits the tax may be working as intended to reduce the drinking of the youngest underage drinkers for whom alcopops are the favoured beverage.

On March 18 2009 the Senate rejected the tax by a single vote. If the government still has an appetite for alcohol reform it can try to renegotiate with the recalcitrant senator, or include the RTD tax excise in the annual budget appropriations bill that will gain parliamentary approval. So the fate of the tax remains uncertain.

Astonishingly, DSICA and other industry representatives argued the tax increased alcohol harm because “drinkers [are] switching from RTDs to cheaper, more potent drinks [i.e. spirits] that increase the likelihood of binge drinking” (5). This extraordinary admission concedes their basic product, full-strength bottled spirits, is unsafe because it encourages dangerous drinking. Even if the spirits industry is successful in defeating the RTD tax it has dismantled its defence against a host of future controls on the marketing and sale of spirits.

References

(1) Broderick G. Teen boozing. The Mercury, 27 August 2007.

(2) Australian Bureau of Statistics. Apparent Consumption of Alcohol, Australia, 2005-06 (Cat No. 4307.0.55.001), Released 25.06.07, ABS, Canberra, 2007.

(3) Stark J. Pre-mixed spirits favoured by binge drink teens. The Age, 15 September 2007.

(4) Walton M. Standard drinks consumption. What’s happened since the RTD tax excise increase? The Nielsen Company, 2008.

(5) McShane M. Beware consequences of alco-flop tax. Adelaide Advertiser, 18 July 2008.