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Spirits rising – at your checkout

From Wednesday, July 1, the government will raise the excise duty on all spirits by at least 2.8%.

The tax hike comes as the Law Commission is mulling its recommendations on raising the excise tax further in a report due at the end of the year.

The Law Commission appears to be using as its base for policy recommendations a controversial study into the social costs of alcohol undertaken by Wellington economics group Berl for ACC and the Ministry of Health.

NBR has covered the controversy around the proposed further excise tax hikes here, while the Treasury is also critical of the report.

A standard 1 litre bottle of spirits with 37% alcohol by volume will see the excise tax portion of its cost rise by 48c from $16.68 to $17.16

Distilled Spirits Association chief executive Thomas Chin says that bars, restaurants and retail sales outlets will have no option but to pass on the increase in tax through higher prices to customers.

“This increase comes at a time when consumers can ill afford further price increases as they struggle with the effects of the recession. The hospitality trade is also under pressure,” Mr Chin said.

He believes tax increases are particularly short sighted at this time as they will contribute to a further decline in sales, job losses across the hospitality, entertainment and beverage industries, and a net negative impact on the government’s coffers.

“If the government is committed to helping business pull through the recession it will avoid this dangerous ‘tax ’em while they are down’ approach and stay the increase in the interests of maintaining employment and enterprise.

“It’s cold and there’s not much economic cheer around. Consumers need a break and the government has an opportunity to deliver some relief for all those who enjoy the warmth a nip of spirits can bring”, Mr Chin said.

More by Mitchell Hall

Comments and questions

Australia has already played with this, but at least they have the balls do do it seriously, with a 40% hike in alcohol tax on RTD's. The effect was to drop sales of those drinks and lift those of bottled spirits.
This is simply a tax take exercise.

I seriously doubt an increase of 48 cents will make a difference to anyone. It won't deter drinkers at all - take a walk down Ponsonby Road on any week night as well as the weekends and you will wonder where the recession is.