Tax Ale

Perhaps protest is out of style and we have become blasé about the bi-annual slug of excise tax, or maybe we feel overpowered by escalating taxation on the ‘easy targets’ of beer, petrol and smokes. Add on gambling revenue from pubs and clubs and you have a government who knows where the cash cows graze and how to milk them.

It shouldn’t come as any real surprise however; the first beer tax goes back to the Saladin tithe introduced by Henry II in 1188 to raise money for the Crusades. Governments since their very existence have used two main tools to intervene between the citizen and his schooner; taxation and licensing. The humble tavern and their beloved ales have subsequently been taxed in every way imaginable. The malt was taxed, the liquor was taxed, the hops were taxed and once the hydrometer was created they taxed the specific gravity of the blessed drop. All under the justification that taxes are helping us and our health. The fact is that attempts to control demand for alcohol by piling on taxes have created a powerful source of revenue that’s as difficult to give up as the products they are trying to wean us off

So who are the biggest losers to this habitual form of taxation known as the GST? It’s certainly not been the wine industry who was granted a ‘privileged class status’ known as the Wine Equalisation Tax (WET). The logic to this exception to the new rule in 2000 was to provide assistance for struggling new small wineries. WET wineries are on an ad valorem tax (it is a value or priced based) and take little account for alcohol content as with beer and spirits plus the first million dollars of sales are tax free. Compare this to a small brewery as we did with Marcus Cox at 3 Ravens Brewery in Melbourne who provided a simple example” So here's how excise works at the moment for full strength beers. Example: the traditional Aussie beer of 4.65% alcohol by volume the first 1.15% is tax free - nice work government.

Calculation for excise is then based on the remaining 3.5% we assume the beer is going into bottle - different rate for kegs 1 litre of pure alcohol incurs a tax of $36.98 - new Feb. rate. .Say we have 100 litres of beer, we can work out the excise payable 100 lt @ 3.5% contains 3.5 litres of pure alcohol. 3.5 (litres of pure alcohol) x 36.98 (the excise rate) = $129.43. So on 100 litres of 4.65% beer, $129.43 is due in tax. Each case of beer is approximately 8 litres, so each case of beer is up for $10.35 tax. With wholesale at about $50, that's a huge component.”

But according to Cameron Hines from the Mountain Goat Brewery, things could be on the mend. “Australia has some fantastic microbreweries producing very high quality, all natural ales and lagers. While the industry has exploded around the world, gaining up to 9% of their respective domestic markets, microbrewing in Aus has remained tiny (microbrewed beer currently accounts for under 0.5 of a percent in the Australian market).

The things that makes microbreweries different from large breweries: Micro's use very expensive, traditional ingredients of the highest quality Micro's are very labour intensive, lacking large automated machinery Micro's don't have economies of scale when it comes to purchasing raw materials.

For these reasons microbreweries around the world are offered reduced excise rates - often reductions of between 30 - 90 % compared to what the big operators pay. This enables microbrewery movements to flourish, creating fantastic regional tourism, and skilled employment and export opportunities.

What we're proposing is similar deal as the wineries have received. We are asking that all Australian breweries receive a refund on the excise paid on their first million dollars of sales annually. This would mean a benefit of approx $100,000 to $200,000 P/A too many small breweries and this would make all the difference and promote strong growth in the sector. The UK, Canada, United States, New Zealand all has thriving microbrewery movements. With the right excise scheme in place the same will happen here.

I am the president of VAMI (Victorian Association of Microbrewers Inc.) and we went to Canberra in June last year. Catherine King Member for Ballarat and Fran Bailey (Minister for Small Business. and Tourism) kindly set up 11 meetings for us and then we held a microbrew tasting in Parliament House at the end of the day. We generally got a good response and have since been organising some economic modelling to take back to Treasury.”

This input and data was backed up by Chuck Hahn, Brewmaster for the Malt Shovel Brewery when he ‘put his small brewer hat on’, “The US craft market showed 7.9% growth last year, or a total of 4% of their entire beer market. They can make more unusual beers because they aren’t taxed on the alcohol, but by volume. This allows for the creation of big, bold, yummy 10 % A/V beers. For the average 5.0% A/V beers, the US pays one tenth the amount of tax as us. As the alcohol rises you really get hit, my Australian Strong Ale requires $4 more excise per case.”

Managing Director of Grand Ridge Brewery Eric Walters gets the last dig in the tax issue because they produce Australia’s highest alcohol beers Moonshine 8.5% A/V and Supershine 11.5%, therefore the most effected by the present taxation system. “There is no parity between small brewers and small wine makers which is unfortunate considering our international fame for the love of great beer. I’ve been operating for 16 years and have seen many small breweries come and go. It’s sad that all efforts to build an industry have received no support or recognition by the federal government. Small brewers are passionate and want to contribute but are unable to run a viable small business especially in regional areas. The present system is unworkable due to the fact that excise taxes are due within seven days but breweries must allow their customers 60-90 days credit, this means the debt grows all the time. I have to pay $30.00 in tax for my Supershine, that’s the same as a slab from the big boys. But if I got rid of Supershine I’d have a riot on my hands from the people who love and adore the big malty taste of a fine crafted scotch ale. If small breweries were provided a parity WET tax, I guarantee immediate increase and employment in the industry around the country.”