SPIRITS PRODUCERS have claimed the Federal Government is “giving with one hand and taking with the other” as the hospitality sector braces for the fourth alcohol tax rise in two years spent battling COVID.

Spirits and Cocktails Australia chief executive Greg Holland described the excise hike of 2.1%, announced by the Australian Tax Office yesterday, as “brutal” at a time when many hospitality operators were struggling to remain afloat.

“Spirits producers in Australia are part of a hospitality ecosystem that is on its knees across the country, with many of our businesses battling the perfect storm of staff shortages, supply chain problems and depressed consumer confidence,” Mr Holland said.

“The Australian way is to give a hand in a time of crisis, but instead this government has given us a hike – the fourth brutal tax hike since COVID arrived on our shores.”

Australia infamously has the third highest spirits tax in the world, after Norway and Iceland, with the impost worsening every six months due to automatic CPI-linked increases. The punishing regime has created a situation where up to 60% of the retail price of an average 700ml bottle of spirits in Australia is tax.

While small distillers won some relief in last year’s Budget, Mr Holland said it now looked like the Federal Government was “playing a game of smoke and mirrors.”

“We were gratified the Budget last May delivered about $20 million in much-needed relief to our industry by increasing the craft distiller remission scheme limit from $100,000 to $350,000 per year,” Mr Holland said.

“But now this latest tax increase, combined with another rise in August 2021, will effectively rake back more than five times that amount, about $100 million in revenue, this financial year. It looks like the government is giving with one hand while taking with the other.”

A joint campaign by Spirits and Cocktails Australia and the Australian Distillers Association has called on the Federal Government to freeze the excise increases for at least three years and align the spirits tax rate with the brandy rate to give the industry a chance to consolidate and recover from the devastating impact of the pandemic.

With the cost of doing business its highest in recent memory, Mr Holland said the tax changes would ease the inflationary pressure on spirits producers and hospitality, and provide the conditions to drive investment and job creation to fuel the industry’s recovery.

Australian Distillers Association chief executive Paul McLeay said Australia’s unfair spirits tax was a handbrake on an industry that could otherwise be booming as Australian wine did in the 1980s and 90s.

“We know the growth of distilling in Australia will deliver benefits from farm to glass,” Mr McLeay said.

“Most of our distillers are based in rural and regional areas and many of them could be employing more staff, buying more local produce, exporting more quality Australian products and attracting more tourists to their regions.

“On top of all of the challenges COVID has thrown at the hospitality industry, a fourth tax hike in two years feels like a kick in the guts.”