Liquor tax – beer and spirit drinkers slugged more than wine drinkers

If we view alcohol as merely a social drug and the form in which we take it (wine, beer, or spirits) as irrelevant, then we have to conclude federal taxing policy is highly discriminatory against beer and spirit drinkers.

By my reckoning, if you drink cheap Scotch Whisky, you’re paying about $50 tax for every litre of pure alcohol consumed. Beer drinkers are less heavily slugged at about $28.60 a litre. Drink $10-a-bottle wine and pay around $22.60. Trade down to 4 litre casks and hand the taxman just $4.08 for every litre of pure alcohol.

Beer and spirits fare worse than wine because they cop a triple tax slug where wine gets only two.

Of the $23.99 you pay for a slab of VB stubbies, the retailer pockets 80 cents, the brewery $10.56, and the tax man $12.63. Of that, $6.40 is excise levied by the federal government at a rate of $14.53 per litre of alcohol; $3.56 is federal sales tax based on 21 per cent of the net selling price to the retailer; and $2.67 is ACT licence fee, calculated at 13 per cent of the post-sales-tax cost to the retailer.

Buy a bottle of McCallum’s Scotch Whisky on special at $17.99 and the retailer gets $1.70, the distiller $2.36, and the tax man a greedy $13.93. The federal excise component is $9.56 (at $33.84 per litre of alcohol plus 8 per cent of the F.O.B. value); federal sales tax $2.50; and ACT licence fee $1.87.

On a $10 bottle of wine, the retailer keeps $2, the wine maker $5.80, and the taxman $2.20, made up of $1.28 federal sales tax (22 per cent of the cost to the retailer), and ACT licence fee of 92 cents (13 per cent of the post-tax cost to the retailer.)

The cask drinker gets a cheap high by comparison. Of the $6.99 paid for a Golden Gate 4 litre wine cask, the retailer retains $1.06, the wine maker $4.30, and the tax man $1.63 (95 cent sales tax, 68 cents licence fee).

The bottom line is the net retail price we pay per litre of pure alcohol for our preferred drug. That works out to about $17.47 for cask wine, $102.56 for $10-a-bottle wine, $54.40 for full-strength beer, and $64.65 for ‘cheap’ Scotch.

The high price paid by bottled-wine drinkers surely tells us there’s more to wine than just the drug alcohol. Scotch drinkers, too, appear to be a dedicated lot. And it must hurt to know three quarters of the money paid for the pleasure of the odd wee dram goes to the tax man.

Scotch drinkers please note, too, a major change about to take place in the market place. You’ll very shortly see prices fall by about a dollar a bottle. But don’t get too excited. There’ll be less in the bottle.

From April 1, United Distillers Limited (UDL)(with 40 per cent of the Scotch market) plans to sell all of its Scotch brands (with only a few exceptions amongst slow-moving pure malts) in 700 mL bottles.

Because excise is based on volume of alcohol and sales tax and licence fee are multipliers on top of excise, cutting the bottle size by 50 mL reduces the tax on a 37.1 per cent alcohol Scotch by almost 70 cents a bottle. In the case of a fighting brand like McCallum’s the retailers landed cost will fall from around $16.29 to $15.61.

That means fighting brands will soon be specialling at $15.99 and $16.99 instead of $16.99 and $17.99. And as UDL owns many brands, including Johnnie Walker and Vat 69, Scotch drinkers will see prices fall by about $1 a bottle across the board.

UDL won’t be alone in moving to 700 mL bottles. Marketing manager Warrick Duthy tells me that over the last three years 700 mL Scotch grew from almost nil to 11 per cent of the market. His group resisted the move at first and preferred to see 750 mL as the standard.

But the commercial reality is that a 700 mL bottle sells for a dollar less than 750 mL and consumers have shown they care only about the dollar not the 50 mL.

UDL will be the first to convert totally to the new size. But glass manufacturer AGM has already announced the imminent availability of a 700 mL bottle. That will allow UDL’s smaller competitors to join the fray. That leaves the other major distiller, Continental Seagram, no choice.

Intensified competition is sure to produce low prices. And the Scotch drinker will no doubt be astute enough to work out the difference between 700 and 750 mL bottles.