Australia's Future Tax System

Final Report: Detailed Analysis

Chapter E: Enhancing social and market outcomes

E5. Alcohol taxation

E5–4 Transition

Imposing a common alcohol tax would result in significant absolute price changes, both upwards and downwards, on a wide range of alcoholic beverages. To ensure that producers and consumers have sufficient time to adjust to new arrangements, the Australian government should develop and announce a long-term transition path to a common alcohol tax.

The long-term transition path would depend on the target volumetric rate of tax, the length of time over which the transition is to occur, and the size of the absolute and relative price impacts on various alcoholic products. This could be done by suspending indexation for the highest taxed-products, while increasing the rate of indexation of the lowest rates of tax.

However, some immediate changes to the current rate and structure of alcohol taxes are justified by the spillover costs associated with particular products, or to remove structural complexity from the existing system. For example, a volumetric tax on wine products should be introduced as a matter of urgency to raise the tax paid on cheap wine — effectively introducing a 'floor price' on alcohol. The system could also be simplified immediately by removing the additional 5 per cent tariff on imported spirits, and removing excise categories that provide concessional treatment for specific products.