Henry Review

tax on alcohol

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Henry’s Volumetric Excise Proposal
Henry proposes
• a single rate of tax (excise) to be applied to the alcohol content of all beverages.
• factors that determine the impact of Henry‟s recommended excise on any alcohol based product are the
alcohol content (expressed as a %) and the size of container (volume).
• the product brand or beverage type has no influence. Henry‟s recommendation treats all alcohol as
alcohol.
The formula used to calculate excise is:

total volume of product (litres) X alcohol strength as a % X excise tariff rate (Henry recommends $41.68)

GST Implications
• GST is directly applied to producer, wholesaler and retailer margins and
therefore is also calculated on the excise component embedded in the
price.
• Henry‟s recommendation is positive revenue generating (not cost neutral)
therefore GST revenue will increase significantly on many products.

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Impact of Henry’s Recommended Volumetric Tax ($41.66)
The following modelling calculations reflect
• Removal of the Wine Equalisation Tax (WET)- currently 29% of wholesale, and replaced by a $41.68
volumetric tax (currently the rate applied to full strength packaged beer). It assumes no WET exemptions
• The current 1.15% beer tax free threshold on all beer being removed
• The draught vs. packaged differential being removed

Analysis
Wine
• Tax savings become progressively greater on wine that currently retails above
approximately $27 i.e. the more expensive the wine the greater the tax savings.
Conversely, tax increases progressively on wine retailing for less than $27, the
cheaper the wine the greater the tax increase relative to the current tax structure.
At about $27 retail current WET + GST = proposed Excise + GST.
• The excise rate ($41.68) is applied to alcohol content not wholesale pricing (WET)
e.g. the excise tax applied under Henry‟s recommendation on a Penfold‟s Grange
at 13.5% alc/vol is the same as a sub $27 retail wine of the same alcohol content.
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Impact of Henry’s Recommended Volumetric Tax ($41.66)
Wine (cont.)
• As a consequence there will be a reduction in GST collection on current $27 plus retail priced wine but a
significant increase in GST recovery on sub $27 wine particularly casks. Note that GST is also applied to
the excise component embedded in the retail price i.e. a tax is applied on a tax.
Beer
• If the 1.15% excise exemption currently available on all beer is removed
there will be higher excise recovery and an additional GST „windfall‟ on all
beer products (draught and packaged and light to full strength).
• With the draught vs. packaged differential removed, draught (on-premise)
product will increase in price significantly relative to same strength packaged
because higher margins are applied to draught products reflecting higher on-
premise occupancy, dispensing and employment costs.
Spirits
• Under Henry‟s proposal spirits and spirit based product drop in price
significantly. It remains to be seen if that is politically achievable.

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Current Non GST Tax on Alcohol

These excise rates are as at February 2010

$80.00
$70.61 $70.61 Excise WET
$70.00

$60.00 Packaged/off-premise on-premise

$50.00
$41.68 $41.68 
$40.00 $35.77
$29.34
$30.00
$22.42
$20.00
$10.33
$10.00 $7.14

$0.00
Spirits RTD/Spirits Full Beer Mid Beer Light Beer Full Beer Mid Beer Light Beer Wine
(packaged) (packaged) (packaged) (draught) (draught) (draught)

 excise not applied to first 1.15% of alc/vol of beer (no exemption for spirits
 estimated average collect overall based on WET rebates, bulk and bottled product etc
 the WET rate is 29 per cent of the wholesale sale value.
 Henry recommends a standard $41.68 excise rate across all alcohol based product 5
Impact of Henry’s Recommended Volumetric Tax ($41.66)
This analysis uses the brands below as a representative cross section of popular alcohol products in terms of styles, product, price
and alcohol content. It is the alcohol/volume (%) and product volume that determines the tax outcome not the brand or product
type.
Product Alcohol/Volume % Recommended. *Licensees Liquor Guide
Price* March 2010
Johnnie Walker Red Label Whisky - 700 ml 40% $43.19
Johnnie Walker Red Label Whisky - 30 ml Nip (on-premise) 40% $5.90
Penfold‟s Grange Shiraz - 750 ml 13.5% $621.45
Penfold‟s Bin 407 Cab. Sauvignon - 750 ml 14% $54.32
Shaw & Smith Sauvignon Blanc - 750 ml 13% $27.00
Richard Hamilton Sauv. Blanc Semillon - 750 ml 12.5% $14.73
Orlando Carrington Blush/Brut - 750 ml 11.5% $7.10
Morris „Fresh Dry White‟ - 4 litre cask 12% $14.75
Hahn Premium Light - glass 285 ml (on-premise) 2.6% $3.97
West End Draught - glass 285 ml (on-premise) 4.5% $4.29
Cascade Premium Light - 24 x 375 ml cans/bottles 2.8% $39.53
Victorian Bitter - 24 x 375 ml cans/bottles 4.6% $47.94 6
 Johnnie Walker Red Label Whisky
700 ml bottle 40% alc/vol – retailer margin 20.8%* - recommended retail $43.19*

$43.19 retail $34.28 retail $31.93 retail

$50.00
-$8.91 -$11.26
$45.00
$40.00 $3.93
$35.00 $8.17
$3.12
$30.00 $2.90
$25.00
$8.17 $6.04
GST
$20.00 $19.77
Retail Margin
$15.00
$11.67 $11.67
Excise
$10.00 Wholesale
$5.00 $11.32 $11.32 $11.32
$0.00
Current $70.61 excise $41.68 excise - same $41.68 excise - same %
cash margin margin
* Licensees‟ Liquor Guide March 2010 7
 Johnnie Walker Red Label Whisky Nip
30 ml Nip 40% alc/vol - retailer margin 75%* - recommended on-premise price $5.90*

$7.00
$5.90 retail $5.51 retail $4.36 retail
-$0.39 -$1.54
$6.00
$0.54
$5.00 $0.50

$4.00 $0.40
$4.02
$3.00 $4.02 GST
$2.97 Retail Margin
$2.00
Excise
$1.00 $0.85 Wholesale
$0.50 $0.50
$0.00 $0.49 $0.49 $0.49
Current $70.61 excise $41.68 excise - same $41.68 excise - same %
cash margin margin
* Licensees‟ Liquor Guide March 2010 8
 Penfolds Grange Shiraz
750 ml bottle 13.5% alc/vol - retailer margin 27.7%* - recommended retail $621.45*

$621.45 retail $488.17 retail - $133.28 (21.4%)

$700.00

$600.00 $56.47
$500.00 $156.46 $44.38
$400.00
$91.83 $122.90
$300.00 $4.22
GST
$200.00 Retail Margin
$316.67 $316.67 WET/Excise
$100.00
Wholesale
$0.00
Current WET Proposed EXCISE
* Licensees‟ Liquor Guide March 2010 9
 Penfolds Bin 407 Cab. Sauvignon
750 ml bottle 14% alc/vol - retailer margin 27.7%* - recommended retail $54.32*

$60.00
$54.32 retail $48.76 retail -$5.56 (10.2%)

$50.00 $4.94
$4.43
$40.00
$13.67
$12.28
$30.00 $8.02 $4.38 GST
$20.00 Retail Margin
WET/Excise
$27.67 $27.67
$10.00 Wholesale

$0.00
Current WET Proposed EXCISE
* Licensees‟ Liquor Guide March 2010 10
 Shaw & Smith Sauvignon Blanc 2009
750 ml bottle 13% alc/vol - retailer margin 27.7%* - recommended retail $27.00*

$30.00
$27.00 retail $27.09 retail +$0.09 (0%)

$25.00 $2.46 $2.46

$20.00 $6.80 $6.82

$15.00 $3.99 $4.06

GST
$10.00 Retail Margin
WET/Excise
$13.75 $13.75
$5.00 Wholesale

$0.00
Current WET Proposed EXCISE
* Licensees‟ Liquor Guide March 2010 11
 Richard Hamilton Sauvignon Blanc Semillon
750 ml bottle 12.5% alc/vol - retailer margin 27.7%* - recommended retail $14.73*

$20.00
$14.73 retail $17.36 retail +$2.63 (17.9%)
$18.00
$16.00 $1.58
$14.00 $1.34 $4.37
$12.00
$3.70
$10.00 GST
$3.91
$8.00 $2.18
Retail Margin
$6.00 WET/Excise
$4.00 $7.50 $7.50 Wholesale
$2.00
$0.00
Current WET Proposed EXCISE
* Licensees‟ Liquor Guide March 2010 12
 Orlando Carrington Blush/Brut
750 ml bottle 11.5% alc/vol - retailer margin 27.7%* - recommended retail $7.10*

$12.00
$7.10 retail $10.96 retail +$3.86 (54%)

$10.00 $1.00

$2.76
$8.00
$0.64
$6.00 GST
$1.80 $3.59
Retail Margin
$4.00 $1.05
WET/Excise
$2.00 Wholesale
$3.61 $3.61
$0.00
Current WET Proposed EXCISE
* Licensees‟ Liquor Guide March 2010 13
 Morris ‘Fresh Dry White’ 4 litre cask
12% alc/vol - retailer margin 24.8%* - recommended retail $14.75*

$45.00
$14.75 retail $34.25 retail $40.69 retail +$25.94 (175.86%)
$40.00 $3.70
$35.00
$3.11 $9.17
$30.00 $3.32
$25.00
$20.00 GST
$1.34 $20.00 $20.00 Retail Margin
$15.00
$10.00 $3.32 WET/Excise
$2.27
$5.00 Wholesale
$7.82 $7.82 $7.82
$0.00
Current WET Proposed Excise - Proposed Excise -
same cash margin same % margin

* Licensees‟ Liquor Guide March 2010 14

 Hahn Premium Light Draught 285ml Glass Consumed On-Premise
2.6% alc/vol - retailer margin 80.8%* - recommended on-premise price $3.97*

$6.00
$3.96 retail $4.27 retail $5.57 retail
+.30c +$1.60c
$0.51
$5.00

$4.00 $0.39
$0.36
$3.00 $4.09 GST
$2.91
$2.00 $2.91 Retail Margin
Excise
$1.00
$0.03 $0.31 $0.31 Wholesale
$0.66 $0.66 $0.66
$0.00
Current $7.14 excise $41.68 excise - same $41.68 excise - same
with 1.15% exemption cash margin % margin

* Licensees‟ Liquor Guide March 2010 15

 West End Draught 285ml Glass Consumed On-Premise
4.5% alc/vol - retailer margin 74.8%* - recommended on-premise price $4.29*

$4.29 retail $4.57 retail $5.39 retail

$6.00
+.28c +.82c
$5.00 $0.49
$0.42
$4.00 $0.39

$3.00 $3.67
$2.92 GST
$2.92
$2.00 Retail Margin

$1.00 $0.28 $0.53 $0.53 Excise

Wholesale
$0.70 $0.70 $0.70
$0.00
Current $29.34 excise $41.68 excise - same $41.68 excise - same %
with 1.15% exemption cash margin margin

* Licensees‟ Liquor Guide March 2010 16

 Cascade Premium Light 24 x 375ml Can/Bottle
2.8% alc/vol - retailer margin 15%* - recommended on-premise price $39.53* (no SA CDL included)

$50.00
$39.53 retail $44.73 retail $45.74 retail
+$5.20 +$6.21
$45.00
$4.07 $4.16
$40.00
$3.55 $1.65 $5.32 $1.86 $6.24 $1.90
$35.00 per unit per unit per unit
$5.32
$30.00 $10.50 $10.50
$5.32
$25.00
$20.00 GST
$15.00 Retail Margin
$10.00
$24.84 $24.84 $24.84
Excise
$5.00
Wholesale
$0.00
Current $35.77 excise $41.68 excise - same $41.68 excise - same %
with 1.15% exemption cash margin margin

* Licensees‟ Liquor Guide March 2010 17

 Victorian Bitter 24 x 375ml Can/Bottle
4.6% alc/vol - retailer margin 15%* - recommended on-premise price $47.94* (no SA CDL included)

$60.00
$47.94 retail $52.20 retail $53.03 retail
+$4.26 +$5.09
$50.00 $4.75 $4.82
$2.00 $2.18 $2.21
$4.31 per unit $6.47 per unit $7.23 per unit
$40.00 $6.47
$30.00 $12.94 $17.26 $17.26
GST
$20.00
Retail Margin
$10.00 $23.72 $23.72 $23.72 Excise
Wholesale
$0.00
Current $41.68 excise $41.68 excise - same $41.68 excise - same %
with 1.15% exemption cash margin margin

* Licensees‟ Liquor Guide March 2010 18

 Comparison of Henry’s recommended $41.68 volumetric tax on current retail
pricing
Note: this chart preserves current approximate retail % margins as at April 2010
$30.00
$25.94
$25.00

$20.00
Spirit Spirit Nip Wine Wine Wine Brut Wine Light Full Light Full
700ml 30ml Bottle Bottle Bottle Bottle Cask Draught Draught Beer Beer
$15.00 $43.19 $5.90 750ml 750ml 750ml 750ml 4Litre Beer Beer Stubby Stubby
(current $54.32 $27 $14.73 $7.10 $14.75 285ml 285ml 375ml 375ml
Retail)

$10.00
$3.86
$5.00 $2.63
$1.60 0.82c 0.25c 0.21c
$0.00
$0.00
-$1.54
-$5.00
-$5.56
-$10.00
-$11.26
-$15.00
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 Comparison of additional tax collected as a result of Henry’s recommended
$41.68 volumetric tax
Note: chart shows additional tax only i.e. the new excise and subsequent GST on that
$30.00
additional excise tax component only
$25.00
$19.50
$20.00
Spirit Spirit Nip Wine Wine Wine Brut Wine Light Full Light Full
700ml 30ml Bottle Bottle Bottle Bottle Cask Draught Draught Beer Beer
$15.00 $43.19 $5.90 750ml 750ml 750ml 750ml 4Litre Beer Beer Stubby Stubby
(current $54.32 $27 $14.73 $7.10 $14.75 285ml 285ml 375ml 375ml
Retail)

$10.00

$5.00 $1.90 $2.79

$0.00 0.31c 0.28c 0.21c 0.18c
$0.00
-$0.39
-$5.00
-$4.15
-$10.00 -$8.91

-$15.00
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Total tax reduction on Penfold’s Grange Shiraz 750 ml 13.5% alc/vol as a result of
Henry’s recommendations = $99.72

$100.00

$50.00

$0.00

total tax
-$50.00 -$87.61 reduction -$99.72

-$100.00 -$33.56
-$12.11
-$150.00

Reduced Excise Reduced Retailers Margin Reduced GST

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Comparison of additional tax collect on wine as a result of Henry’s recommended
$41.68 volumetric tax
*current retail price as per Licensees Liquor Guide $19.50
$20.00
$1.90 $2.79
$0.00
$0.00
-$4.15
Penfold‟s Bin 407 Sauvignon Sauv. Blanc Carrington Morris
-$20.00 Grange Shiraz Blanc Semillon 750ml Blush/Brut Wine Cask
750 ml 750ml 750ml 12.5% Sparkling 4Litre
13% 14% 13% $14.73* 750ml 12%
-$40.00 $621.45* $54.32* $27* 11.5% $14.75*
$7.10*

-$60.00

-$80.00 Note: chart shows additional tax only i.e. the

new excise and subsequent GST on that
-$99.72 additional excise tax component only
-$100.00
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A Consumers Perspective

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 The Sydney Morning Herald 27th January 2010 page 29

“And the power of the beer, clubs and pubs lobby groups cannot be underestimated. Beer is the most popular alcoholic beverage in
Australia and full- strength beer in particular tends to be the preference of Labor's core voters.
Howard tried to change beer tax with the introduction of GST but quickly backed down when the Coalition recognised the political pain
associated with a campaign that harnessed the power of the beer drinking public. The beer lobby put together the largest petition in
Australian political history in encouraging beer drinkers to have their shout.”

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