Taxing time

As the Australian Government’s budget woes continue, Treasurer Scott Morrison and his sidekick Finance Minister Mathias Cormann have seemingly finally conceded that increasing taxes might be worth a peek. And not before time, since virtually every economic commentator in the country has been pointing to the government’s revenue problem.

Today, The Guardian’s Stephen Koukoulas (Balanced budget needs higher tax take, but which taxes should be hiked?) has opined about where’s the money.

Koukoulas has wondered about cancelling the $50 billion company tax cuts, hiking the GST, limiting negative gearing, and increasing the Medicare levy. He makes the solid point that “tax hikes are not so hard. The electorate can live with them if they can see where the money is going. Look at the minimal political pain associated with tax increases over the past few years on tobacco [and] the re-indexation of petrol”.

He should have suggested reforming alcohol taxes too.

There have been innumerable public inquires recommending alcohol tax reform – most notably the Henry Inquiry in 2010. Hypothecating these for the health and welfare services would be helpful for all concerned.

The Foundation for Alcohol Research and Education (FARE) Pre-Budget submission proposes modest changes to the alcohol tax system that would deliver almost $3 billion of annual revenue to the Australian Government.

It would be a total rip-off for all of this largesse to go towards fixing the budget bottom line, but if Treasurer Morrison were to adopt FARE’s total package he would still have more than $2 billion annually at his disposal.

First, the Treasurer needs to support a range of measures that would protect the welfare and future prosperity of Australian families, particularly the kids who are exposed to unacceptable levels of alcohol harm.

Each year, more than a million (one in five) Australian children are negatively impacted by the drinking of others. Our children are exposed to unprecedented levels of alcohol advertising. And they are directly affected by alcohol consumption during pregnancy and the debilitating lifelong conditions that can result.

FARE’s Pre-Budget submission 2017-18 points to the high cost to children of alcohol misuse, a financial burden well in excess of the alcohol tax revenue currently collected.

The benefits of this proposal are threefold – with the costed plan providing the government with much-needed revenue, the opportunity to implement sensible and long overdue reform of the alcohol tax regime, and a meaningful and tangible way to address the harm caused by alcohol.

With the budget under such pressure, this represents more than just an opportunity to demonstrate fiscal responsibility. Here the Australian Government has a chance to do much more.

We’re proposing a win-win that could see an end to our broken and oft-criticised alcohol tax system, and most importantly, the opportunity to invest that revenue windfall in our children and the future prosperity of our nation.

Reform of the alcohol tax system, recommended by ten previous government reviews, is the cornerstone of FARE’s tax proposal. The move would deliver $2.9 billion annually, reduce Australia’s alcohol consumption by an estimated 9.4 per cent and discourage the production of cheap low-quality alcohol in favour of higher end wine products.

The phased reform includes a step-by-step implementation plan, which would first transition the Wine Equalisation Tax (WET) to a volumetric system, then remove the WET rebate, and finally increase the excise rate on all alcohol products by a minimum of ten per cent.

To ensure these savings are wisely invested in preventive health, FARE is calling for policy measures to prioritise the safety and future of our children, by reducing the burden placed on young people and families from the drinking of others and helping the next generation establish healthy attitudes to alcohol.

Inappropriate alcohol sponsorship of sporting and cultural events watched by millions of young Australians would be phased out under FARE’s plan, with the establishment of a $100 million Alcohol Sponsorship Replacement Fund to allow four years for sporting codes to transition to alternative family-friendly sponsors.

More than $25 million would go to states and territories to ensure programs to reduce family and domestic violence take a family-centred approach and include support for alcohol and drug services; and to pilot an innovative program requiring repeat alcohol-related family violence offenders to undergo mandatory daily alcohol and drug testing.

With rising rates of childhood obesity, falling levels literacy and numeracy, and chronic youth unemployment – it’s the least the government can do for the kids of Australia.

Over to you Scott.


View the media release

View FARE’s Pre-Budget submission 2017-18

NB: FARE’s submission has the endorsement and support of the Valuing Children Initiative, which aims to inspire Australians to value all children, understand that a child’s wellbeing is the shared responsibility of the entire community and ensure children are at the forefront of our considerations.

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Michael Thorn

Michael is the Chief Executive of the Foundation for Alcohol Research and Education (FARE), and tweets from @MichaelTThorn.

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