Australia’s Spirits Industry Grapples with Escalating Excise Amid Economic Turbulence
Twice yearly, Australia‘s spirits sector braces for an excise tax hike, adjusted in accordance with the Consumer Price Index (CPI). The latest increase, effective from 1 August 2023, saw a rise of 2.2% — a modest shift compared to last August’s record 4.1% jump and the 3.7% hike in February.
Meanwhile, in the UK, Chancellor Jeremy Hunt announced a pivotal decision in his autumn budget statement. Alcohol duty in the UK will see a freeze, extending to 1 August 2024. This decision comes after the UK’s spirits tax surged by 10.1% earlier this year, marking the largest increase in nearly half a century.
Nicole Lestal, from Spirits & Cocktails Australia, views Hunt’s strategy as a response to the evolving economic landscape and industry dynamics. She notes that following the UK’s substantial duty rise in August, spirits sales plummeted by 20%, severely impacting the distilling industry and denting government revenue.
The UK’s Office for National Statistics reported that this tax hike played a significant role in the country’s highest inflation spike on record.
In Australia, spirits excise has escalated by 12.5% in less than two years, leaping from AU$88.91 (US$58.42) to AU$100.05 (US$65.75) per litre of alcohol. This increase exacerbates inflation and cost-of-living pressures, with alcohol beverages alone contributing to 5.03% of the total CPI in the September quarter.
Paul McLeay, CEO of the Australian Distillers Association, highlights the drastic change since the current excise regime began in 1983. Then, only two spirits producers existed in Australia. Now, over 600 businesses grapple with this tax, which, according to McLeay, has outlived its usefulness.
With another tax increase looming in February, McLeay urges the Australian government to emulate the UK’s approach by freezing the spirits excise, thereby alleviating some pressure on Australians.
