Taxing " Grog " !

A long time ago - when Bob Hawke was prime minister - the government decided to decrease the alcohol content to create a choice of full strength or " light " beer.  The  excise tax remained the same and so the price of either was unchanged - either over the bar or in the bottle shop.

Bob Hawke tried to convince us that the alcohol strength was not the reason we drank beer.  It was the refreshing taste and we should accept the equal price for both full strength and the light product. That argument went down like a lead balloon and was compounded by a Hawke gaffe while electioneering in a country town.

He proposed a round of drinks with several fellows in a pub - and put a five dollar bill on the bar to pay for the round..  It seems that prime ministers have little call on pocket change and he was obviously out of touch with the cost of a schooner in that day and age.  The government caved in and instituted a lower excise tax on light beer.

Now the anti-alcohol lobby is trying to do away with heavily discounted cans and bottles sold in bottle shops and the " Happy Hour " so popular in many pubs on Friday and Saturday night.  Their argument is that " a beer is a beer - is a beer " and the tax should apply equally irrespective of what form it comes in.

That ties in with the proposal to institute a floor price on all forms of alcohol.  At present, the tax differs depending on whether the alcohol is beer, spirits or wine - and how it is packaged.  The anti-alcohol lobby wants any form of alcoholic drink to have a minimum price component to eliminate " cheap " products which they say encourages binge drinking.

The main target seems to be cask wine.  A five litre cask often sells for as low as ten dollars and this proposal would push the price to forty-five dollars.   The excise on all alcohol would rise by ten percent and both cheap drinks over the bar and buying a carton of cans or bottles from the bottle  shop would reflect that base price per drink.   It is estimated that this would increase the governments excise tax dividend by another $ 2.9 billion a year.

Typical of anti-alcohol lobby thinking, this proposal is being offered to the government as a revenue increase.  The excise hike would cost taxpayers $ 2.9 billion and only $ 27.5 million would be ploughed back in preventive health spending, with the balance going into government coffers.  That is tempting to any Treasurer.

There is a lesson to be learned here from what happened when the government decided to tackle another health problem.   We hiked the cost of cigarettes in the hope that a dollar a smoke would see many smokers quit.  Some did, but the price delivered an opportunity to the black economy and we are awash with smuggled tobacco pouring in through our opaque customs control.

The " law of supply and demand " applies.   We Australians love our grog and if the government puts it out of economic reach the black economy will fill that need.   All it takes is the legitimate price to rise to a level where the smuggler can make a profit.