Casey's Beer

So the government has said the Henry tax review will be released next weekend. I wonder is there is any signicance in releasing a tax review on May Day?

Tax has always been a big topic for brewing. Over the centuries it has shaped beer styles. Not only has alcohol been taxed, so too has malt. When Arthur Guiness started brewing malt was taxed, so the use of roast barley, which was not taxed, rather than roast malt gave Guiness a strong financial advantage. In Japan both alcohol and malt are still taxed. This puts all malt beers at a disadvantage and explains the boom in “beers” with very little malt. Different kinds of pulses are used, as was once the case in Britain with “pease beer”.

The timing of when taxes are paid is also important. traditionally in Belgium the tax officer came round and calculated and collected the tax before the brewer started brewing. The brewer was naturally loathe to throw away any failed brews. Some say this explains some of the Belgian beer styles.

With any kind of tax there are always tensions. Economists and treasury officials want “rational” taxes. Politicians want to use taxes variously to influence public behaviour and social objective, gain votes and reward supporters.

Currently beer and spirits are taxed on their alcohol content, with spirits taxed at a higher rate. Beer is taxed at two rates depending on alcohol content, and at two other rates depending on container size. Wine is taxed on its value rather than its alcohol content.

Ken Henry, the Treasury secretary, is known to favour taxing alcohol content. The wine industry do not want this at all because it would mean the retail price of mass wines would increase hugely, while the price of high end wines would fall. If the current beer rate were used there would be about $15 of tax on a 4 litre cask, and $3 on a bottle of Grange. GST would still be levied.

Health goups favour this approach, they also favour the abolition of the Wine Equalisation Tax exemption for small winemakers. The wine industry are very nervous about all of this.

In their submission the Brewers’ Association said they are happy with things the way they are. However for small breweries the two big issues are container size and the prospect of an excise relief scheme similar to that enjoyed by small winemakers. The Austalian Hotel Association is dead set opposed to changing the differential excise rate based on container size.

Despite lodging a petition for an excise concession scheme with the Federal Parliament, I don’t think the Microbrewers’ Association made a submission to the Henry tax review. There is nothing to be found in the list of submissions. The Tasmanian Association did make a submission outling the cases for the excise consession scheme, and reducing the container size for the lower bulk beer excise rate.

Whatever recommendation Ken Henry makes, they still have to be taken up by the Government. I don’t like the chances of an excise concession scheme getting up either way.

However container size is very important and the size should be reduced from 48 to say 20 litres. As the Tasmanian association argued there are OH&S issues with 50 litre kegs.

From purely a beer perspective the problem with 50 litre kegs is turnover. For example my local pub has been recently tarted up. It now runs 3 Squires beers, Big Helga and Fat Yak, Coopers Green, Pure Blonde, Cascade Light in addition to the standard pub beers. The problem is that they don’t turn over enough beer to justify that number of taps. For the VB, Tooheys etc the turnover is fine, but for the rest it’s not. Last Sunday evening I ordered a schooner of Squire’s amber and it was tangy. Not the first time either. I complained about it and was told that they clean the lines every week – the previous licensee was notorious for not cleaning the lines. Even with the wonders of glycol cooling systems and regular line cleaning, the beer still needs to turn over it can’t sit there for weeks on end.

If a small brewery is lucky enough to get a tap in a pub it’s beer is not going to turnover like Tooheys or VB. How long will a 50 litre keg last before the beer starts to sour? Once the beer does sour Joe Punter trying the beer for the first time will conclude that is how the beer is supposed to taste and big surprise he doesn’t like it. Even worse he might conclude that all small brewery beer tastes like that. People won’t drink it and the publican is left with beer they can’t sell. With a 20 litre keg there would not be these problems except that at the moment the beer in the 20 litre keg has excise levied at a rate about 40% higher than the same beer in a 50 litre keg.

Anyway we will see next week what Ken Henry recommends. I wonder whether any of the online bookies are taking bets on it.

This entry was posted on Sunday, April 25th, 2010 at 4:01 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.