The alcohol industry is suffocated by red tape

by David Leyonhjelm — chair of the Senate Inquiry into Red Tape

Originally published in Drinks trade issue 59 (July/August 2017)

It won’t surprise any of you in the business of supplying and serving alcohol that the Senate Committee into Red Tape heard extensive evidence that your industry is suffocating under a mountain of illogical rules and regulations.

The Committee heard that while each new piece of red tape might seem simple to the legislators, the entire regulatory burden is death by a thousand cuts. The licences, fees and restrictions mean that businesses are not free to operate, evolve or improve.

Across Australia, there are no less than 62 different types of licences and 24 different types of permits for businesses to acquire if they want to serve alcohol. No wonder some businesses are moving interstate or just shutting up shop.

The Committee also heard that much of the red tape burden in the industry arises from the tax system.

In 2016, the OECD reported that Australia was the third highest alcoholic beverage taxing country among its member countries. This explains why Australian alcohol is often cheaper when purchased overseas.

Small distillers and brewers faced particular discrimination from the tax system, not just with respect to the differing tax rates, but also with respect to their engagement with the Tax Office.

Taxation is not only high but also confusing thanks to two taxation systems that provide for 16 tax rates and various concessions.
This means, for example, that a case of a certain type of ginger beer is subject to $21.54 of excise tax, while the same sized case of a similar ginger beer is subject to only $8.70 of wine equalisation tax because it is characterised as a fruit or vegetable wine. This is despite the fact that the cheaper ginger beer subject has almost twice as much alcohol by volume.
We heard other examples where different rates of tax don’t support harm minimisation. For example, the ‘alcopops’ tax was encouraging young people to buy large bottles of spirits and pre-loading them rather than measured pre-packaged bottles of alcohol.
And in a typical Queensland pub or club, after 1am you can order a bottle of wine (about seven standard drinks) or a jug of beer (about four standard drinks), but not a single serve of whisky on ice (one standard drink).

Several inquiry participants, including representatives of the Northern Territory Government, agreed that alcohol taxation should target alcohol content, rather than the mechanism by which the alcohol is delivered. This is in line with the recommendations of the 2010 Henry Tax Review.

We heard evidence that the industry is overseeing a general trend towards lower alcohol consumption and less binge drinking. The number of people in Australia drinking at levels that placed them at lifetime risk of an alcohol-related disease or injury fell by approximately 250,000 in the three years up to 2013.

More people are choosing quality over quantity. And there are also increasing numbers of people abstaining altogether.

This suggests that more Australians are drinking in moderation and that regulations should target those who are at risk rather than the vast majority of responsible drinkers.

The alcohol industry is important to Australia. The retail liquor industry alone employs 47,800 people. It supports thousands of small businesses that annually contribute over $17 billion in sales activity and $5.1 billion in various taxes to the government. It deserves a reduced red tape burden.

You can find the interim findings of the Red Tape Inquiry on the sale, supply and taxation of alcohol online at www.aph.gov.au