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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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