An historic alliance of award-winning craft distillers and large spirits companies is in Canberra this week calling for urgent government action to fix Australia’s punitive spirits tax regime.

Australia currently has the third highest spirits tax in the world, with automatic six-monthly indexation further increasing the disproportionate burden placed on spirits, compared to all other alcohol categories.

A joint Pre-Budget Submission by the Australian Distillers Association and Spirits & Cocktails Australia recommends reducing the spirits tax to match brandy, and freezing CPI increases for three years to ease the burden on distillers recovering from bushfires and COVID-19 lockdowns. The alliance is also calling for an increase in the excise refund limit, from $100,000 to $350,000, to grant craft distillers an equivalent level of support to small wine producers.

“About two-thirds of Australian distillers are based in rural and regional communities and after a horror year, they urgently need this unfair tax fixed,” ADA President and Four Pillars cofounder Stuart Gregor said.

“Once they bounce back, we know the benefits will flow from the farm to the glass. They’ll create more jobs, buy more produce from rural suppliers and help attract tourism to their communities, but they are being held back by this punitive tax burden.”

Critically, the Submission’s recommended action would also be revenue-positive, boosting tax revenues by $1.4 billon over forward estimates, according to independent modelling conducted by PwC.

Spirits & Cocktails Australia Chief Executive Greg Holland also cited evidence from the United Kingdom, where a decision in 2017 to freeze the spirits tax actually boosted government revenue and prompted a wave of investment, particularly in rural areas.

“In comparison, Australia’s out-of-control tax is now so high, it is actually suppressing demand, meaning less revenue than if the tax rate was lower,” Mr Holland said.

“This simple change would mean more money in government coffers to spend on social services and other investment as the economy recovers from COVID, as well as a much-needed stimulus for our distillers and the tourism and hospitality sectors.

“What’s more, we know Australian spirits can compete on the world stage and they have the potential to become a lucrative export earner. But right now you can buy a bottle of Australian whisky or gin in the USA and pay less than you pay here. That’s just crazy.”

The modelling, conducted for Spirits & Cocktails Australia by consultancy firm PwC, analysed three different options to make Australia’s alcohol tax regime more fair by either: cutting the spirits tax rate to match the brandy rate; freezing CPI rises for three years; or a combination of both measures.

The PwC modelling showed all three options would aid the spirits sector while generating more revenue for Treasury.