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Tax changes urged to stop cheap alcohol

Tax reforms aimed at reducing the proliferation of cheap and harmful alcohol could increase government revenue by $1.5 billion.

A report issued today by the Alcohol Education and Rehabilitation Foundation urges the Federal Government to tax wine according to its alcohol content, rather than its price.

It says current taxation arrangements are harming communities and producers by allowing cask wine to be sold for less than the cost of a bottle of water.

''The existing wine tax arrangements allow individuals who are seeking to consume alcohol irresponsibly to do so cheaply,'' the report says.

''Incongruently, the regime also applies tax more heavily to individuals looking to purchase quality wines for the purposes of reasonable consumption.''

The 25-page report, which will be delivered to the Treasurer's office this afternoon, explores three ways the current wine equalisation tax and rebate could be reformed.


The three scenarios involve taxing wine according to its volume and would reduce alcohol consumption by between 4.85 million litres and 16.34million litres of pure alcohol.

Demand for cask wine could drop by up to 61.2per cent and the Government could reap up to $1.5billion in additional revenue.

Alcohol Education and Rehabilitation Foundation chief executive Michael Thorn said price was the single most important factor in driving up alcohol consumption.

''We have a tax system that drives up the production of cheap booze, but we need a tax system that reduces harms associated with excessive drinking,'' he said.

''Five per cent of all cancers are a result of alcohol use, it causes violence and we know over the last decade there has been a tenfold increase in young people with liver disease and hospitalisations.''

He said tax reforms would also create a level playing field for wine producers.

''This illustrates just how much the taxpayer is being ripped off by the wine equalisation tax, the boutique end of the business is being murdered by the cheap wine producers and have to pay much higher taxes.''

The health advocate said the Government's October tax summit had turned a blind eye to alcohol tax reform.

According to Mr Thorn, not a single health professional has been invited to take part in the forum and the alcohol tax reform is unlikely to be discussed.

The Government has previously raised the issue of a ''wine glut'' as a reason for delaying reform.

However, Mr Thorn said the wine glut was being exacerbated by the current tax scheme, which he said encouraged producers to churn out wine on the basis of volume rather than value.

The Henry review described Australia's alcohol tax system as ''incoherent'' and said changes were a ''matter of urgency''.