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Tim's Ravings

Posted by Tim Stevens on

Alcohol abuse is a scourge

Alcohol abuse is a scourge. It destroys lives and comes at a huge economic and social cost. Taxation is a good way to discourage abuse, just like with cigarettes right? Well not with the current system.

While I’m sure there are a couple of billionaires rotting their livers with three bottles of Grange a day, and maybe even a few of you dear patrons over-enthusiastically consume our $27 a bottle Cabernets on occasion, it is clear that where price really affects the volume of consumption is at the bottom end of the market.

The bottom feeders of the wine industry – selling wine for less per litre than beer, but packing up
to three times more alcohol into every drop – are selling a product to get people merry at best and drop down drunk at worst. In general, people don’t savour the subtle notes of cigar box, forest floor and bramble, or chew the tannins on something that comes out of a goon bag or two bottles for $10 on multi-buy from Dan Murphys.

But the current tax system goes easy on the cheap wine, while punishing the premium products that are consumed more for pleasure than in need. A $50 bottle is taxed at $15, a $10 bottle at $2. Cheap wine attracts the least amount of tax compared to beers and spirits, and outsells premium wine by about nine to one.

More revenue could be raised and alcohol abuse better discouraged if taxation was based on alcohol levels instead of price. The price of cheap wine would go up, the price at the quality end would come down, achieving the twin goals of bettering responsible wine drinking and improving industry profitability and export growth.

Sounds good doesn’t it? Not if you’re one of the small number of large companies that accounts
for 90% of the wine volume sold in this country. They’ve done their price elasticity studies and worked out that they will sell a lot less if their prices go up. And let’s be clear, it’s the large companies who have the ear of the government through their powerful lobbying bodies like Wine Federation Australia.

So it is that we’re stuck with a tax system that encourages abuse, hampers the development of the higher quality product that all players acknowledge is the key to sustained profitability, and is inefficient to boot. Chin chin.

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