Proposed alcohol tax increase could kill craft brewers

Law commission chief Sir Geoffrey Palmer’s proposed alcohol tax increase will disproportionately hurt craft brewers, who argue they are the very people who promote responsible beer drinking the most.

Using a Berl report on the costs of alcohol as a starting point for discussion, Mr Palmer is mooting an across the board increase of the excise tax on alcohol in a bid to reduce the social and health costs of excessive alcohol consumption.

An overall tax increase of $6 per litre of absolute alcohol has been mooted as a starting point in the Alcohol Healthwatch Briefing Paper 2004, “with possible further increases depending on indicators of harm.”

Sir Geoffrey points to the substantial gap between the taxes the country receives from alcohol purchases: $795 million; and an estimated social cost of harmful misuse of alcohol being $5.296 billion, and argues for redressing the difference by simply increasing the excise tax.

Craft brewer Luke Nicholas of Epic Beer and the Real Beer website contends that not only is the Berl study the Law Commission using as its starting point flawed,but also from a health and violence point of view it would make more sense to not only remove excise taxes from the niche craft brewing industry but actually subsidise it.

A six pack of Epic costs around $20, the same price as a dozen Tuis, “so people aren’t going to be binge drinking on Epic for a start” says Mr Nicholas, and it’s representative of the 50 small craft breweries around the country who just don’t make products a binge-drinker is going to consume.

“Binge drinkers treat their consumables like commodities, which is what they’re being marketed as. They’ll just drink any old swill as long as it’s cold and it gets them pissed, they don’t care. They’re a different group of people from the people that are drinking craft beer”, says Mr Nicholas.

The problem arguably lies with products like Tui, Lion Red, Export Gold and RTDs rather than craft beers. So according to the logic of using price as a disincentive to drink, the lower end of the market is where the focus of any increased taxes should be according to craft brewers (who are represented by industry body the Society of Beer Advocates (SOBA).

“Craft brewers make people take the time to think about what they’re consuming because they’ve got a lot of choice; they can sit down and talk about what they’re drinking, the different styles, and who’s made it. Whereas with Lion and that it’s just a big stream of liquid that comes out, and they just put different colours on it to make it look pretty and keep the price down. There’s nothing to talk about there because all the beers are the same.” Mr Nicholas says.

Craft brewers say they are creating a product and culture for more responsible drinkers, pointing to their ubiquitous availability in brew pubs, where specialty beers are available with food – and are encouraged to be matched.

“A lot of these businesses, the segment of the market that are doing the most to encourage a responsible drinking culture would be hurt the worst, and to a point where it would make a lot of these businesses get crushed,” Mr Nicholas says.

“And if the price goes up too much, people will just start bootlegging it, creating moonshine or home brew, and then you’ve just created this black market, which creates a bigger problem.”

So, contrary to suffering an excise tax increase – craft brewers should receive tax relief in the form of an entry-level bracket to encourage a nascent industry and drinking culture.

Mr Nicholas points to comments by by Christchurch economist Eric Crampton published in the Press, that argues that the “Berl report cannot form the basis for any reasonable consideration of the welfare effects of alcohol policy” because of faulty economic assumptions that underlie its reasoning.

“I’m very, very confused and I don’t want my business to be destroyed because of the minority of people that abuse alcohol,” he says.

A petition started by Nelson publican Mic Dover urges tax breaks for brewers of craft beer. It is available here.

Update: Labour MP Lianne Dalziel is backing the petition.

"On tax increases, I totally agree with (Mr Dover),"says Ms Dalziel, "who
raised a very good point. They (craft beers) are not the problem as far as
beer sales are concerned, therefore across-the-board tax increases would
unfairly impact on them as compared to the major suppliers of beer, which
are actually supermarkets, not micro-brewery operations or indeed some of
the bottle stores we have around New Zealand."

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10 Comments & Questions

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This seems like yet another stuff up, just like the one that saw older people paying excessive tax on their sherry and port when the supposed aim was RTD's.
RTD's and popular beers are the ones that need the tax increase as they are what the binge drinkers use.

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A bigger help would be to put the drinking age back up to 20 and make it tougher for people to obtain alcohol. Don't penalise the sensible drinkers because of the idiots!

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Mr Palmer and his cohorts thought the RMA was an effective measure to control planning .. the outcome was wasted opportunity, excessive delays and leaky houses by the thousands. The same is proposed with the attempt at taxing alcohol.
the issue is excessive consumption by underage drinkers .. it has nothing to do with money or the price of alcohol.. take away the cars of drunk drivers.. have alco police.. who can breath test anyone anywhere and suggest they get off the street or out of a bar and have a cool down. have a booze prison.. 14 day first offense for drunk in public.. thanks progress. there are a few islamic laws that will cut the mustard in this direction.

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While I agree that young drinkers are a big part of the problem, instituting Sharia in a bid to reduce alcohol related harms seems a *tad* drastic, not to mention fascist police state to me. Just sayin'.

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Prior to Political Correctness, being a discerning or discriminating person was praiseworthy. Nowadays the Govt and it's tax system trying a one-size-fits-all approach to the complex problems of problem-drinking. Thus high quality is not discriminated against and nor is cheap no-frills p**s. Other areas of income taxing are as complex and as targeted as the latest Intel chipset can calculate but not with alcohol, it seems. Does this mean that cough medicines, too, will be taxed; Particularly those sickly-sweet brightly coloured ones ?

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Does it strike anyone as incredible that the government can go to so much trouble to create a complex system for taxing alcohol, at at the same time matters such as reviewing whether GST should be paid on food or RUC paid at the pump are too hard??

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I doubt this tax will lower the alcohol consumption overall, in fact I don't think price is a factor for those suffering from addiction. That's the sad reality, check any <a rel="follow" href="http://www.casapalmera.com">drug and alcohol rehab center</a> for further reference. If they worry so much about craft brewers they should just be protected from the increase.

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I must actually say that the craft beer industry has substantially increased my consumption of alcohol.
Until last year I no longer regularly drank as I found that as I grew older as the taste of “beer” became less enjoyable as the idea of getting drunk became less interesting. Wine seemed to provide a little bit of flavour to drinking but never felt like a good fit with me. While a keen student of Whiskey and the bourbons of this world they are better enjoyed on special moments rather than regularly. My misunderstanding was not that I disliked beer it was just that I was drinking mass produced swill suitable only for the purpose for which it was created, separating the consumer from their coin.
Finding a, at the time, new bar called House in Hamilton caused an immediate and significant increase in the amount of beer consumed in a week. This affected several of my friends as well, we now find ourselves trapped in the cycle of enjoying a variety of palatably brews of exceptional quality every Thursday evening. This pattern was tempered somewhat by my requirement to drive home most nights but as the summer rolls in and I start to walk to work more and more the spacious deck out front of House and the myriad of summer ales maturing as we speak causes me much discomfort as I consider the level to which I imbibe the devils juice.

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The increase of the alcohol tax may have a negative effect on brewers, but it should definitely have a positive effect on the global health of the country. It's very well known that alcohol leads to a huge number of diseases, most of the chronic consumers ending up in different rehab centers. But it's lesser known that beside the obvious problems it causes, alcohol can seriously affect the digestive system. I'm speaking about that because I am a MD specialized in this area . In the <a rel="follow" href="http://www.eatingdisordertreatment.com">anorexia treatment center</a> I work in, a very big number of patients are alcohol abusers and although they all go home healthy from our point of view, there are a lot more problems and diseases they have that are above our expertise. So, any measure taken to reduce the number of consumers is a good measure in our book.

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Finding a, at the time, new bar called House in Hamilton caused an immediate and significant increase in the amount of beer consumed in a week. This affected several of my friends as well, we now find ourselves trapped in the cycle of enjoying a variety of palatably brews of exceptional quality every Thursday evening. This pattern was tempered somewhat by my requirement to drive home most nights but as the summer rolls in and I start to walk to work more and more the spacious deck out front of House and the myriad of summer ales maturing as we speak causes me much discomfort as I consider the level to which I imbibe the devils juice. <a href="http://www.automobilehouse.com/alfa-romeo-mito-mileage">Alfa Romeo Mito mileage</a>

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