Australia Needs to Drop Wine Equalization Tax

March 8, 2016 Taxation in Australia

CANBERRA – The Australian government could see its revenue grow by billions, if it started taxing wines based on strength and not just wholesale price.

On March 8th the Australian think-tank Foundation for Alcohol Research and Education (FARE) made a pre-budget submission for the 2016-17 Australian Government Budget plan, calling for several changes to the taxation of alcohol, claiming that the proposed measures could help raise an extra AUD 2.9 billion in tax revenues.

In its report FARE urged the government to drop the current value-based Wine Equalization Tax system, and instead implement an alcohol tax system based on the alcohol content of the drink.

FARE suggested that the current value-based approach to the taxation of wine results in minimal taxation on low-value but high-alcohol drinks, which are particular destructive to health and society.

Further, FARE called on the government to hike the excise tax on all alcoholic drinks by 10 percent, and to peg the annual increase in the excise rate to average weekly earnings, instead of the CPI to ensure that alcohol does not become relatively more affordable during times of low inflation.

The proposed changes were labelled as being modest, and it was estimated that the government could see tax revenues rise by an extra AUD 2.9 billion per year if they were implemented in full.

It was also noted that if the changes are implemented a portion of the extra tax revenues should be earmarked to fund programs aimed at reducing the harm caused by alcohol.

Photo By: Martin Howard