A rise in the " Sin " Tax !

Years ago " budget night " was dreaded by many people.   When the Treasurer arose to deliver his budget speech there was always the certainty that some sort of increase would be imposed on what were called " sin " commodities - alcohol and cigarettes.   There was usually a purchase surge as people stocked up in expectation of a tax rise.

Scotland has just introduced a new way of taxing alcohol that will send a shudder through the world alcohol industry.  It seems for the Scots that the day of getting access to cheap booze is ending.  All forms of alcohol will be subjected to a floor price based on the alcohol content and this will comprise 50 p for each standard serving unit - which amounts to 76 cents in our money.

This has been ordered on health grounds.  It seems that the Scots are more enthusiastic imbibers than their English and Welsh cousins and their consumption of alcohol is directly related to illness, violence and injury.   In  the past thirty years the incidence of chronic liver disease and cirrhosis is far greater in Scotland than in England and Wales, or any European country.

In Australia, the tax differs depending on the type of alcohol to which it applies and this does produce anomalies.  Taxing the alcohol content of beer as opposed to spirits is quite different, and both of these diverge from the tax on wine.   What has raised the ire of the anti-alcohol lobby in this country is an Australian invention that is now critical to the success of quality Australian wines on the very competitive world wine market.

The " wine cask " was a South Australian invention that consists of a reflective barrier with a pouring spigot contained within a cardboard box.  This has found favour because the wine industry blends many grape varieties to achieve the high standards of its top quality wines and this results in a surplus which falls just below that exalted standard.  Much of this is packaged in wine casks and sold in the liquor stores at a discounted price to achieve economy of scale in wine production costs.   It is not uncommon for five litres of such wine to sell for ten dollars a cask - representing just two dollar a litre.

A five litre cask contains forty-nine standard drinks according to the appropriate health regulations - which at that discount price delivers each standard drink at a cost of just twenty cents.   Should that Scottish tax regime be adopted in Australia each nip would rise to a minimum of seventy-six cents - and that  ten dollar wine cask would rise to thirty seven dollars.

The world wine industry works on the principle of the profit from top selling wine being averaged by wine that does not meet that standard being cleared in bottles with a lesser  label or sold in cask wine mode to clear production costs.  The wine customer accepts that he or she is getting a slightly lesser wine but paying a sharp reduction on the price asked for the premium product.  Should those prices rise because of this tax it is unlikely that sales would meet present volumes and doom the Australian wine industry.

Of course  Scotland is the home of famous Scotch whiskey and that is a very different market than wine.  The Australian climate favours wine production and our wines attract premium prices because of its quality and it is a fast growing industry in all the southern states.  It is also an industry where small individual producers can achieve fame and fortune by their skill in blending to achieve the taste and bouquet that find world favour.

Hopefully, the government thinks long and hard before it adopts measures that could have unintended consequences.   What works well in other parts of the world may not ne suitable for the environment here.