I hope I am not going to bore you to bloody death about excise, but it is a really important issue for the alcohol industries. For example, it’s easy to laugh at Fosters for reducing the alcohol content of Victoria Bitter (VB) by 0.02% to avoid a price increase that would have come with a Consumer Price Index increase to excise. The saving is 74 cents per carton of 9 litres. Given the very tight margins for brewers and retailers in the mass beer market, and the price sensitivity of the mass market this is a considerable amount of money.
Taxes on beer have sometimes had very large impacts on beer styles. Before alcohol content could be accurately assessed it was common for malt to be taxed. And in some circumstances both malt and alcohol have been taxed. Taxes on malt were responsible for the world’s most famous beer, Guinness. It uses a good proportion of unmalted barley.
In Belgium brewers traditionally paid the tax on their beer before it was brewed. The tax officer would come round assess their ingredients, calculate and collect the tax before that beer was brewed. Consequently Belgian brewers were, supposedly, loathe to throw any beer away despite how poorly it might have turned out.
In Japan there is a tax on malt, partly a hangover from nineteenth century British influences and partly to appease the sake industry. The standard of brewing in Japan is high – remember sake is actually a rice beer. One of the best stouts in the world is Asahi Stout – a rich and complex all malt 8.5% beer which is also fermented with brettanomyces. They also brew pseudo beers with very little malt to get around the tax on malt.
Over the last while there has been the big fuss over excise on the so-called alcopops and the parliamentary machinations to change it. When spirit based alcopops first came on the market they were subject to excise at the spirit rate. The manufacturers successfully lobbied to have the lesser beer rate of excise applied because they were a similar alcohol content of about 5% rather than the 40% typical of spirits. The concessional beer rate is now being dropped and alcopops will again be taxed at the spirit rate.
The microbrewers’ association has petitioned the government in pursuit of an excise concession scheme similar to what the small winemakers enjoy. And to top it all of there is the Henry tax review. Ken Henry the Treasury secretary is conducting a very large review of the tax system. Just about everything is open to review except the GST. But more of these matters later.