Alcohol Red Tape
Red tape is a death by a thousand cuts problem. Each
individual regulation and each individual piece of red tape can seem quite
simple—it's just one extra form or one extra requirement. But it adds up to a
really substantial burden over time.[1]
2.1
In 2015, the Australian Chamber of Commerce and Industry's National
Red Tape Survey revealed a considerable regulatory burden of red tape on
business. Nearly half the respondents reported that the impact of regulation
had prevented them from making changes to grow their business. A quarter said
they had spent 11 hours or more each week on compliance and almost half
estimated annual compliance costs in excess of $10 000.[2]
2.2
According to inquiry participants, Australia's level of alcohol regulation
is one of the highest, if not the highest, in the world.[3]
The committee heard that this regulation unnecessarily burdens business and
inhibits its focus on employment and economic objectives.[4]
For example, Diageo Australia, the largest premium spirits company in
Australia, submitted:
...an increasingly challenging regulatory landscape and 'red
tape' culture is suffocating the industry. Australian distillers and consumers
currently pay some of the highest alcohol taxes in the world, while businesses have
to decipher a maze of overly-complex bureaucracy which varies significantly
across the states.[5]
2.3
Without such regulation, the Australian Liquor Stores Association (ALSA)
indicated that the retail liquor industry could contribute further to job
creation, and business growth and investment:
The retail liquor industry has a strong capacity to generate
additional employment and economic activity from the removal of unnecessary
restrictions on trade and competition. Current restrictions have inhibited
business investment and stifled opportunities for the existing 47,800
employees, and the many thousands of small businesses who annually contribute
over $17 billion in sales activity and $5.1 billion in various taxes including
excise, [Wine Equalisation Tax], and [Goods and Services Tax] to the Australian
economy, before personal income tax or company tax.[6]
Alcohol taxation policy
2.4
As indicated in chapter one, there are complex arrangements for the
taxation of alcohol across Australia. In a 2015 report, the Parliamentary
Budget Office attributed this complexity to systemic changes that have been made
over time in response to policy objectives.[7]
The committee received information and heard views about various policy
objectives—such as the raising of revenue, the minimisation of alcohol‑related
harm, and the provision of support for sections of the alcohol industry.
2.5
What the committee also heard is that there is much confusion about the
current policy objective of alcohol taxation. What is the objective of taxing alcohol?
Is there more than one objective and if so, how are or how should these
objectives be balanced? Is there a disconnect between the policy and
achievement of its objective(s)?
2.6
A representative from the Institute of Public Affairs (IPA) highlighted
that public policy should be based on an agreed objective with an effective
policy mechanism:
The way to make good public policy is to agree on an
objective and then ask, 'What's the most efficient way to achieve that
objective?'[8]
2.7
The committee is concerned that, in relation to alcohol taxation, the policy
objectives are not clearly and consistently articulated, and the policy
mechanisms have not necessarily been effective. Some evidence questioned
whether taxation should be a policy tool for the minimisation of
alcohol-related harm, while others argued that the complex taxation
arrangements distort consumption patterns, affecting the raising of revenue.
2.8
Some participants called attention to the need for governments to
justify their alcohol policy objectives. In the context of harm minimisation,
for example, the committee heard that there is no quantification of the
externalities that the policy aims to address. As one witness from the IPA
said:
The economics of this say: if there are some social costs and
you impose costs on other people, then there is supposedly a role for
government to come in and correct those social costs. What we see, particularly
for this product—but we see it for many other products as well—is that it is
difficult to agree on that initial social cost. The estimates for this
particular product range in the billions of dollars.[9]
Effect on business
2.9
The Treasury acknowledged the importance of incentivising business to
innovate, operate efficiently and be price competitive.[10]
However, the committee notes that stakeholders in the alcohol industry—both
large and small business—described alcohol regulation as not conducive to employment
and economic objectives.
2.10
If a policy objective is to increase productivity and raise government revenue,
then the committee recognises that there is a need for regulation that promotes
rather than discourages (or penalises) the alcohol industry. As one witness
observed:
...we have a series of proposals which are designed to make it
easier to do business, cheaper to do business, more efficient to do business
and easier for consumers to access the products they need whilst still
accounting for these externalities you keep hearing about...What we really want
[is] to move away from the idea of these externalities as an excuse for the
government to raise more money and address them for what they actually are—that
is, a quantifiable problem with a number of solutions that we can use against
them rather than simply, 'We have this business making all this money, let's
increase the taxes on it.' What you are ultimately doing is punishing a
business for being successful, for creating more commerce and for employing
more people.[11]
Alcohol consumption in the general
population, 2013
2.11
Participants observed that Australia has an evolving attitude toward
alcohol consumption.[12]
According to the Australian Institute of Health and Welfare, the consumption of
alcohol in quantities that placed Australians at risk of an alcohol‑related
disease, illness or injury was stable between 2001 and 2010. However, in the
most recent National Drug and Alcohol Survey, there were some noticeable
changes:
-
there was a decrease in the proportion of people exceeding the [National
Health and Medical Research Council] guidelines for lifetime risk by consuming
more than 2 standard drinks per day on average, from 20% to 18.2%
-
the number of people in Australia drinking at levels that placed
them at lifetime risk of an alcohol-related disease or injury in 2013 fell by
approximately 250,000 (3.7 million in 2010 down to 3.5 million in 2013)
-
fewer people consumed 5 or more standard drinks on a single
drinking occasion at least once a month, declining from 5.2 million in 2010 to
5.0 million in 2013. The proportion exceeding these guidelines declined from
29% in 2010 to 26% in 2013
-
a higher proportion abstained from drinking alcohol and the
proportion rose from 19.9% in 2010 to 22% in 2013.[13]
2.12
Some participants referred to these key health indicators and expressed
the view that alcohol causes significant problems for only a small proportion
of the Australian population. Accordingly, they suggested that policy should
not penalise the alcohol industry with excessive regulation but target support
for at-risk drinkers.[14]
Taxation
2.13
In 2016, the Organisation for Economic Co-operation and Development
reported that Australia was the third highest alcoholic beverage taxing country
among its member countries.[15]
MyChoice Australia told the committee that these taxes disproportionately
affect business, with the 'little guys' most affected:
...a lot of these regulations do not actually hurt the big
companies that much. They really hurt the little guys: your small brewers, your
small vineyards and your small spirit distillers especially—they face one of
the highest spirit taxes in the entire world. To be frank, it is kind of
shameful that I can go to America and buy a bottle of Australian distilled
spirits for far less than I pay for it in Australia.[16]
2.14
This section of the report discusses differential treatment in alcohol
taxation, reform of alcohol taxation, regulatory controls for volumes-based
duties, and red tape reduction initiatives.
Differential treatment in alcohol
taxation
2.15
Submitters commented on the level of alcohol taxation in Australia and
highlighted the differential treatment of alcohol products. This is largely a
consequence of two taxation systems that provide for 16 tax rates and various
concessions.[17]
2.16
The Parliamentary Budget Office has previously stated that comparison of
the tax treatment of alcohol across products is complicated by two factors.
First, there is no correlation between the effective tax rates and alcohol
content—for example, beverages subject to the highest rates have an alcohol
content ranging from very low to very high (spirits, Ready-To-Drinks and
expensive wine). Second, the average effective tax rates vary significantly
across product types (Table 2.1).
Table 2.1: Effective excise rates, quantities and revenue by alcohol type,
2015–2016
Source: Parliamentary Budget Office, Additional
Information (received 8 March 2017), pp. 3–4.
2.17
Table 2.1 shows also:
-
full-strength packaged beer, mid-priced wine and spirits are
consumed most (about 60 per cent of alcohol consumption);
-
there is very low consumption of certain beverage types (brandy,
low-strength and non‑commercial beer); and
-
the most expensive wine category has a relatively high effective
excise rate compared to other wine, due to it incurring a larger tax liability
under the Wine Equalisation Tax (WET) system.[18]
2.18
Some submitters focussed specifically on the excise and
excise equivalent customs system. Their submissions argued that these
volumetric-based taxes distort consumption patterns.[19]
To illustrate the point, Diageo Australia submitted:
...over 70% of the price of a bottle of Johnnie Walker Red or
Bundaberg UP is tax. This creates market distortion where spirits and
ready-to-drink (RTDs) beverages, which account for less than 20% of Australian
alcohol sales, contribute about 50% of alcohol excise.[20]
2.19
Similarly, the Distilled Spirits Industry Council of Australia (DSICA) stated
that there is great variation in the amount of alcohol tax paid for each
standard drink (Table 2.2).[21]
Table 2.2: Alcohol (non-GST) tax per standard drink, as at 1 August 2016
Source: DSICA, answer to question on notice (received 7
March 2017), slide 2.
2.20
Alec Wagstaff, Chief Executive Officer of DSICA, added:
...with a lower cost spirit on sale in Dan Murphy's, if you are
buying a $30 bottle of spirits, you are paying in the order of the $25 to $26
excise on that spirit...You are paying $1.06 per standard serve—and there are
23 serves in a 700 mL bottle...for something like a very high-end wine—an
extreme, super high-end bottle of wine like Grange—you are probably paying $200
or $300 WET on that wine. That is at the extreme end. That is getting down to
$30 per serve of alcohol.[22]
2.21
Drilling down even further, DSICA contrasted the treatment of a single
product with alcohol content (ginger beer) under the excise and excise
equivalent customs system, and the WET system:
...a ginger beer with 4.5 per cent alcohol by volume is taxed
as a 'ready to drink' (RTD) at a rate of $1.01 per standard drink. The tax
payable on a case of twelve 500ml bottles is $21.54 under the excise regime.
However, a ginger beer that is nearly identical except that it has 8 per cent
or more alcohol by volume is, instead, taxed on its wholesale selling price
because it is characterised as a fruit or vegetable wine and subject to the WET
regime. At a wholesale price of $30, the tax payable on a case of twelve 500ml
bottles is $8.70 under the WET regime. The producer may also be able to claim
the wine producer rebate. This shows the significantly lower rate of taxation
that can apply to beverages subject to taxation under the WET regime, despite
the beverage containing more alcohol.[23]
2.22
The Royal Australasian College of Surgeons commented on the more
favourable taxation treatment under the WET system. Its submission considered
the WET system as the 'illogical' result of not having developed policy from a
set of consistent policy principles:
Originally designed to support small producers in rural and
remote areas of Australia, the policy has been undermined by its availability
to all producers, with large producers taking advantage of tax loopholes, and
New Zealand producers having access to the rebate. The WET is different to
other alcohol taxes in that it has no consideration for the alcohol content of
the product.[24]
Reform of alcohol taxation
2.23
Submitters argued that alcohol taxation is inhibiting innovation and
growth in small business (primarily the craft spirits industry).[25]
The Australian Taxpayers' Alliance and MyChoice Australia supported repealing
the 'sin tax' on alcohol.[26]
The Australian Hotels Association (AHA) agreed but observed:
...the community would expect a degree of taxation to apply to
the sale of liquor so that behaviour can be directed in a certain way.[27]
2.24
However, the AHA's National Chief Executive Stephen Ferguson highlighted
that this policy objective might not always be achieved by the taxing of
alcohol. He cited the 'alcopops' tax as an example of ineffective taxation:
...what that actually did was shift kids from a measured
quantity of alcohol in a measured container to the cheaper product which is
indiscriminate: buying 1,125 millilitre bottles of spirits instead [and
preloading].[28]
Potential effect of not reforming
alcohol taxation
2.25
Several witnesses commented on the potential effect of not reforming
alcohol taxation, noting that changes to excise (including from indexation) affect
business margins. Jules Norton Selzer from Diageo Australia told the committee
'there is a limit to how much [a business] can absorb'.[29]
Similarly, a representative from Coca‑Cola Amatil described what happens
when those margins become unviable:
...if there is no price realisation opportunity, we have to
look for cost reduction strategies, such as closing facilities, integrating
facilities or looking for cheaper alternatives in our packaging costs. We are
forced to look around the world for better packaging costs. That has an impact
on the other parts of industry within Australia. It forces us because we have
to deliver a return to run our business. These issues cause us to have to
really think differently. We do have issues at times—and we talked about the
overnight tax change in 2007 with the RTD tax. I was in the industry at that
time with the Fosters business and we had to overnight look at the resourcing,
the staff levels and the income because it changed the metrics of our business.[30]
2.26
Alec Wagstaff from DSICA predicted:
...if you extrapolate 10 years down the track and continue the
indexation of the current different rates, you do get to a situation where the
critical mass of the industry starts to come into question.[31]
Introduction of volumetric taxation
2.27
Inquiry participants argued that alcohol taxation should target alcohol
content, rather than the mechanism by which the alcohol is delivered.[32]
Further, there were several references to the 2010 Australia's Future Tax
System Review (Henry Tax Review), with submitters supporting the recommendation
to reform alcohol taxation with the introduction of a volumetric tax for all
alcoholic beverages.[33]
For example, DSICA submitted:
...the ideal system for alcohol tax is a single volumetric tax
rate for all alcohol beverages. Such a tax supports consumers' choices and
recognises that all alcohol is the same, regardless of the type of beverage. A
single rate volumetric tax would be simpler, fairer, and more efficient, ending
the discrimination between drinkers.[34]
2.28
The NT Government expressed the view that the Australian Government
should contribute to the measures adopted in various jurisdictions aimed at reducing
alcohol-related harm. Its submission also identified a volumetric tax on
alcohol as an effective measure:
The Northern Territory Government believes that this Inquiry
provides an excellent opportunity for the Federal Government to consider the
introduction of a volumetric tax on all alcoholic beverages which would
complement the initiatives that state and territory governments have taken
within their own regulatory framework around the sale, supply and consumption
of liquor and the harms that can result.[35]
Department response
2.29
In response, a representative from the Australian Taxation Office (ATO) told
the committee that the alcohol industry does not have a singular view on what
would constitute a 'volumetric tax':
Is that a [tax] that applies to wine or is that a volumetrics
that applies to all alcohol at a single rate that draws in? I do not believe
that that has been thought through by some of the advocates of a volumetric
system. I think they have looked at it in their own patch. You could say:
'Wine collects X. What would a volumetric rate be to get X? Beer collects Y.
What would a volumetric rate be to collect for beer?' You could split it up or
you could go to one.[36]
2.30
The officer noted that the Henry Tax Review 'had a model of a quantum,
and then you set a rate to raise the revenue for that quantum'. However, an
integral part of that quantum—the cost of externalities—is not known. Officers expressed
reservations about calculating a revenue neutral figure. Their evidence to the
committee was that introducing a volumetric tax for all alcoholic beverages
would change the dynamics of consumption as well as affecting revenue to an
unknown extent:
What I heard today was $6.2 billion [revenue], based on 2016
figures. A rate set at that would have an effect. Excise is a volumetrics tax.
The WET is not; it is an ad valorem tax. We know that with wine, if you looked
at it from a volumetrics perspective, it is going to have an effect. As soon as
you move to a volumetric system, whatever your rate, cheap wine becomes dearer
and premium wine becomes cheaper...Spirits become cheaper.[37]
2.31
The committee notes that there are various calculations of a revenue
neutral rate of volumetric tax, ranging per litre from $32.39 (based on
2013–2014 figures)[38]
to $36.50 (based on 2015–2016 figures).[39]
Irrespective of the precise figure, as shown in Table 2.2 above, this rate
would be much lower than as is currently levied for brandy, spirits and RTDs.
Regulatory controls for volumes-based
duties
2.32
The Excise Tariff Act 1921 (Cth) and the Customs Tariff Act
1995 (Cth) set out administrative arrangements and impose controls in
relation to excisable goods and excise equivalent goods (EEGs), respectively.
2.33
The ATO explained that this regulation is designed to protect revenue,
by maintaining control over goods from the time of manufacture or
importation until the tax liabilities are discharged:
-
for excisable goods—controls are built into the excise licensing
system (such as a manufacturer licence, a storage licence and a movement
permission) and the excise payment system (such as periodic settlement
permission and pre‑payment); and
-
for EEGs—controls focus on the importation and movement of goods (such
as a Warehouse Declaration, an Ex-Warehouse Declaration, and a customs
warehouse licence).[40]
2.34
Treasury acknowledged that alcohol taxation is complex and submitted
that the 'upstream suppliers' are better placed than retailers to understand
and comply with taxation regulation.[41]
However, the committee heard that there is still a significant regulatory
burden for manufacturers and importers.[42]
2.35
The ATO advised that excise administration is undergoing some
'transformational change'. This included the identification and implementation
of red tape reductions relating to the administration of excise and excise
equivalent goods. One 2014–2016 initiative aimed to simplify the excise renewal
process, by issuing a single renewal form for clients with multiple licences
and consolidating licences for the same premises.[43]
2.36
In its submission, the ATO also described some initiatives that utilise
digital technologies. These initiatives align with the Digital Transformation
Agenda, which aims to drive innovation and make it easier for individuals and
businesses to access government services.[44]
2.37
Coca-Cola Amatil, which makes paper-based applications to the ATO,
submitted that 'an online system would be far simpler and [more] cost-effective'.
It identified two services that could be provided online: applications for
manufacturer and storage licences, and movement permissions.[45]
Time for payment of excise and
excise equivalent customs duties
2.38
A specific area of red tape that submitters found particularly
burdensome was the time for payment of excise and excise equivalent customs
duties. Some submitters highlighted that large businesses must lodge an excise
return and pay excise duty on a seven day settlement period. Campari Australia
submitted, for example:
This requirement places an administrative and compliance
burden on our business in terms of both financial and human resources and is
not in general keeping with the traditional end of month payment cycle observed
by many businesses in Australia.[46]
Remission of duties
2.39
Excise duty attaches to excisable alcohol from the point of manufacture.
One way in which this liability can be extinguished is by remission, which
may be granted on application where underbond alcohol has deteriorated or been
damaged, pillaged, lost or destroyed.[47]
2.40
The ATO advised that the regulations allow for some limited
circumstances in which a remission on excise duty may be made without
application. As part of its 'transformational change', the remission process
has recently been streamlined for a small number of large alcohol clients, to
also grant them pre‑approval for the destruction of certain goods.[48]
2.41
In relation to excise equivalent customs duty, the ATO submitted that
the regulations may allow for a remission of customs duty however an
application for remission must still be made.[49]
Diageo Australia told the committee:
Customs still require businesses to lodge remission request[s]
prior to destroying any Imported Products, which delays the write off process
due to an approval lead time.[50]
2.42
The committee notes that, in 2010, the ATO acquired responsibility for
administration of excise equivalent goods, from the Department of Immigration
and Border Protection. As one officer from the ATO explained:
Under authority of the Department of Immigration and Border
Protection, we already do certain things that are under their banner of
responsibility... In relation to the destruction of goods we administer the
warehouses and we do allow the remissions, and we do supervise those. They are
already under our control.[51]
Small business and embryonic
distilleries
2.43
Submitters also told the committee that the monthly settlement period is
problematic for small businesses with limited working capital. Alec Wagstaff
from DSICA explained:
I was lucky enough to meet with Will Edwards from Archie Rose
earlier this week at his distillery...One of the things that is particularly
crippling for them—it is something that could easily be fixed—is the timing of
excise collection. They do get dispensation as small distillers from weekly
collection. They are allowed to do it monthly. However, as they grow and they
get trading terms with the major retailers, their trading terms with major
retailers are typically 60 days. So they are having to fork out the excise
before they get the money, and that is a significant impediment for a small
business with limited working capital...We would much rather see our members,
perhaps the larger distillers, being able to do it monthly and the smaller guys
being able to do it quarterly.[52]
2.44
Similarly, the Craft Beer Industry Association described the burden of
compliance for its members:
The ATO requires brewers to reports in litres of alcohol
(LALs) sold. To enable this brewers must complete a full stock count each
reporting period. They must then convert those sales figures into LALs. Given
that brewers' sales are not based on LALS but instead on beer and package type
this requires the brewer to formulate their own system which enables them to
convert those sales into LALs taking into account each beer's sales figures and
alcohol by volume (ABV) percentage. For those reporting weekly this process
must be completed each Monday to allow for payment to be made by 4pm that day. On
average each small brewery requires somebody to spend approximately half a day
completing and ensuring the accuracy of their return. For those on monthly
returns this is a significant administrative burden. For those on a weekly
return cycle it is a system that has serious effects on their business.[53]
2.45
The ATO confirmed that one of its red tape reduction initiatives was to
offer certain small businesses 'monthly settlement when they apply for a
licence'.[54]
An officer stated that there might be scope to further extend the time for
settlement:
...it may be possible to look at using excise liability as the
basis for moving to monthly lodgement. We are aware that there are some
entities that exceed the $2 million turnover threshold at this point in time
but have relatively very small liabilities that really require them to lodge on
a weekly basis.[55]
2.46
However, the ATO also indicated that legislation limited its discretion
in relation to payment schedules, and that this would need to be changed.[56]
2.47
The committee notes that frequent remittances are intended to assist
government cash flow.[57]
However, the committee considers that this approach disadvantages and strangles
small businesses—such as embryonic distilleries—whose cash flow is far more
precarious than that of big businesses or the government. Furthermore, the ATO indicated
that there is scope to remedy this situation to the mutual benefit of the
affected parties:
If capacity to access monthly lodgment were applied to excise
liability thresholds it may result in lower compliance costs for business [and]
reduced administration for the ATO without having any meaningful effect on
government cash flow.[58]
2.48
The ATO and the Treasury stated that they would need to create a policy
case to change the timing of payments. However:
...with the appropriate legislative authority or even discretion,
we could perhaps end up with some better outcomes for business because we are
basing it on risk rather than an absolute threshold...we believe that there are
organisations that we could move to monthly settlements that currently do not
qualify.[59]
2.49
The committee would welcome such a development and urges the Australian
Government to consider a risk threshold that provides for all small businesses.
In this regard, the committee suggests that a threshold of, say, $50 000 would
be too minimalistic and exclude a large number of small businesses that should
be supported.
Red tape reduction initiatives
2.50
In 2010, several key administrative functions relating to EEGs were
transferred from the Department of Immigration and Border Protection to the ATO.[60]
An ATO representative explained 'those shifts occurred because industry thought
it would be more efficient to deal with one organisation rather than two'.[61]
2.51
DSICA acknowledged that this arrangement reduced the administrative
burden for the alcohol industry.[62]
However, the committee heard that large businesses still need several full time
equivalent employees to manage the burden of compliance. For example, Coca-Cola
Amatil submitted:
The [alcohol compliance] manager oversees compliance
requirements like ensuring liquor licence numbers are correctly captured,
customs and excise duty is acquitted, customs and excise licences are renewed,
liquor licences are renewed and that staff involved in sale of alcohol have
Responsible Service of Alcohol (RSA) qualifications, relevant to the state or
states that they work in.[63]
2.52
DSICA submitted that there are further opportunities to reduce red tape
in alcohol regulation.[64]
In particular, it supported the introduction of legislation to provide the
ATO with full responsibility for all matters relating to excisable goods and
EEGs.[65]
2.53
As mentioned, many of the functions identified by DSICA are already
performed by the ATO.[66]
In addition, the committee heard that there might be difficulties with the
proposal due to constitutional considerations, as well as what might be
appropriate:
...there are some things that are border control functions—and
there is certainly expertise at a border control level to do that—and there are
some things that probably sit within our domain and area of expertise.[67]
2.54
Representatives from DSICA supported gradual change in the area of
alcohol taxation reform: 'the distilled spirits industry is not advocating
overnight, radical change that disrupts industry'.[68]
Based on information from the ATO and the Treasury, the committee notes that
red tape reduction initiatives are slowly progressing.
...Treasury has not received a package from [the ATO] to say
that these are the things that we definitely want to explore. Nothing has been
costed and it certainly has not progressed past that. It is under a
deregulation flag or banner. The Treasury is very interested in deregulation.[69]
Alcohol licensing regimes
2.55
Chapter one of this report referred to the eight alcohol licensing
regimes that regulate the sale and supply of alcohol throughout Australia. In
total, there are no fewer than 62 different types of licence and 24 different
types of permit available among the regulatory regimes. Inquiry participants
commented that the variation within and across these regimes is unnecessarily
complex and costly, particularly for businesses that operate in more than one
jurisdiction.[70]
2.56
ALSA provided the following example of how variable regulations affect
grocery stores in three jurisdictions:
In Queensland a grocery retailer would only be able to hold a
liquor store licence if it owned a hotel licence.
In New South Wales a grocery retailer can have a contained
liquor offer within a grocery store but the sale is only able to be processed
from a licensed register. Anyone under the age of eighteen will need to
purchase their groceries from an unlicensed register.
In Victoria a grocery retailer can have a contained liquor
offer within a grocery store and any register can process the sale.[71]
2.57
Diageo Australia summarised the effect of multiple regulation on a
business:
Navigating this maze of regulation takes a huge amount of man
hours and is off-putting for a licensee to set up or expand a business.
Furthermore, there is the ever-increasing cost of obtaining or maintaining a
licence. This borders on the ridiculous.[72]
Reduce regulation by focussing on
enforcement
2.58
Some submitters argued that there should be as little regulation as
possible, with a greater emphasis on enforcement for the smaller number of
licensees who contravene alcohol licensing laws. The IPA noted that regulation
is regularly predicated on public safety grounds.[73]
However, inquiry participants told the committee that alcohol consumption
patterns are changing, with more Australians drinking responsibly and
'trading up' to drink 'better rather than more'.[74]
Further, the effect of too much regulation is to penalise business. Diageo
Australia stated:
[These businesses] are being treated as 'guilty until proven
innocent'. This in turn puts people off coming out in the city of Sydney,
which at the moment needs all the support it can get to attract patrons. A
better approach would be to impose sanctions on those failing to comply rather
than burden everyone.[75]
2.59
Similarly, the Small Bar Association NSW submitted:
A responsible retailer of alcohol simply will not, and is not
legally permitted to, serve an intoxicated person, or a person at risk of
intoxication by further service. In our view, enforcement of this core
principle, which is universally supported and implemented among our membership,
addresses the majority of public concerns around service of alcohol beverages.[76]
2.60
The IPA argued that, if the government wishes to restrict autonomous
individuals from engaging in trade, then the government should bear 'the burden
of proof':
If it is determined there is a deviation (i.e. there is a 'market
failure' supposedly identified) from some objective, then the question is still
comparatively institutional: how should the objective be met? For liquor
licensing, this could come in several potential ways. The general approach
adopted across Australia...is the 'licence first' approach, followed generally by
penalties for defections on the existing regulations. The alternative option,
however, is to apply lighter touch regulation before the fact, and direct those
resources towards detecting and enforcing defections from existing regulation.
This approach would be a reduction in red tape for Australian businesses.[77]
Bias in licence fee structures
2.61
Submitters and witnesses expressed concern with multiple aspects of the
alcohol licensing regimes, including a perceived bias in licence fee structures.[78]
Most licence fees are based on the calculation of 'risk' associated with a
commercial activity, taking into consideration factors such as venue capacity,
number of patrons and trading hours. These considerations may be less relevant
to off-premises licences, leading to lower licence fees. On the other hand,
some participants argued that there are illogical outcomes for on-premises
licences. For example, the Australian Taxpayers' Alliance and MyChoice Australia
submitted:
In the ACT, a liquor store operating near a shopping centre
and which closes at 9 pm pays a significantly higher license fee than a
nightclub operating in the CBD precinct which is open until 4 am. In NSW, a
family business operating 18 liquor stores across the state with no recorded
infractions is required to close at 10 pm and pays 140% more in fees than a
large capacity nightclub venue in the Sydney CBD precinct that operates until 3
am.[79]
2.62
The IPA questioned the rationale underpinning tiered fee structures,
which it argued are not clearly linked to public health and safety.
Its submission expressed the view that 'the burden should be placed on
government when it wishes to levy fees higher than the cost it takes to
administer the licences'.[80]
2.63
In addition, the IPA recommended that licence fees should be
lowered and 'flattened' to incentivise businesses to grow and increase their
business activities and trade.[81]
The Australian Taxpayers' Alliance and MyChoice Australia agreed, considering
that the current fee structures are designed to favour revenue raising:
...it effectively punishes rather than rewards businesses
engaging in a greater magnitude of trade and commerce. A flat fee may lead to
smaller venues paying slightly more than they currently do. However, it would
still amount to a considerable overall reduction of red tape as well as an
incentive for smaller businesses to expand and grow. Fee indexation would
provide a safeguard against arbitrary or revenue raising-driven fee increases
in the future.[82]
Responsible Service of Alcohol
certification
2.64
At present, the eight alcohol licensing regimes have different
approaches to RSA certification (Table 2.3).
Table 2.3: RSA Certification, states and territories, as
at February 2017
|
|
Is RSA mandatory? |
Are interstate RSA certificates recognised? |
Online accreditation |
| WA |
Yes |
Yes |
Yes |
| ACT |
Yes |
Yes, subject to a refresher course with an approved
trainer |
Yes |
| NSW |
Yes |
No (and its certification is not recognised in other
jurisdictions) |
Yes |
| NT |
Yes |
Yes |
Yes |
| Qld |
Yes |
Yes, if issued within the last three years |
Yes |
| SA |
No |
Yes |
No |
| Tasmania |
Yes |
Yes, subject to a refresher course with an approved
trainer |
Yes |
| Victoria |
Yes |
Yes, if issued within the last three years and
obtained in face-to-face training and a face-to-face bridging course
is required |
No |
Source: Coca-Cola
Amatil, Submission 6, Attachment 1, p. 1.
2.65
A number of participants raised the issue of RSA certification.[83]
The committee heard that, although the principles are common throughout
Australia, not all jurisdictions recognise RSA certification obtained in
another jurisdiction.[84]
For example:
There are no significant differences between the principles
governing responsible service of alcohol from one state or territory to the
next. Individuals possessing adequate training and experience in alcohol
service in one state must waste time and money to obtain the same qualification
when they work in a different state. This hurts workers while resulting in a
less competitive labour market and fails to encourage the availability of
workers in rural or remote areas where there may be shortages.[85]
2.66
From an employer's point of view, Campari Australia agreed:
For companies such as ours who have employees involved in the
sale, supply or service of alcohol on licensed premises across several
Australian jurisdictions, this means the respective employees are required to
hold multiple RSA certifications. We believe this is an unnecessary duplication
and an administrative and compliance burden on our business in terms of both
cost and time completing multiple courses comprising of essentially identical
content.[86]
Restricted hours and conditions of
sale
2.67
Some submitters and witnesses referred particularly to regulations in certain
jurisdictions that have introduced restricted hours and conditions for the sale
of certain alcohol products, in particular spirits and Ready-To-Drink products.[87]
For example, the Small Bar Association NSW highlighted that its members
cannot serve spirits or liqueurs without a mixer after 12.00am or in measures
exceeding 30ml:
We have a bar in Sydney called the Baxter Inn...and that is one
of the best whisky bars in the world—not just in Australia, but in the world.
It is world renowned. One of the issues they have had recently is that if you
bought a nip, a 300 millilitre shot, of 60-year-old Talisker whisky that would
cost between $80 and $100. You had to have that with Coke. That is ridiculous.
If someone comes in and they are willing to spend that much money on a nip of
world-class whisky they should be able to have it any way they want. That is
where these layers of legislation in New South Wales are getting a little bit
crazy. After certain hours you cannot have a classic martini or a Negroni,
because they do not fit within what New South Wales says is responsible service
of alcohol.[88]
2.68
In the Queensland context, DSICA highlighted an inconsistent outcome of
these restrictions:
A set of restrictions such as those in the Queensland
legislation makes no sense: a drinker in a typical Queensland pub or club at
1am can order a bottle of wine (approx. 7 standard drinks) or a jug of beer
(approx. 4 standard drinks), but not a single serve of whisky on ice (1
standard drink).[89]
2.69
Submitters questioned the rationale for this type of 'micro‑regulation',
stating that the restrictions—aimed at reducing alcohol-fuelled violence—are premised
on false assumptions about the biology of consumption, and concepts of
causation and correlation.[90]
Diageo Australia, for example, contended:
...the choice of beverage for at-risk drinkers varies
significantly across all age cohorts and gender. A wide ranging-piece of
research conducted by academics worldwide studied the link between harm and
different drinks in 19 different countries and found that there is no increased
risk from any particular type of drink...A standard gin and tonic–or vodka and
soda– contain less alcohol than a glass of wine or a schooner of beer ...Scientifically
all alcohol has the same effects on the human body–it is how much a person
drinks and their response to alcohol that matters, not what type of drink.[91]
2.70
Some submitters argued that over-regulation has affected competition (particularly
among small businesses), and interfered with economic growth and consumer
choice. The Small Bar Association NSW, for example, stated that its members
have not been free to operate, evolve and improve their businesses:
The service restrictions...deprive consumers of choice, and
deprive the highly-respected, Australian domestic craft distilling industry of
what should be the primary showcase for their premium products. NSW licensees
are hindered in their capacity to develop their businesses, to distinguish
themselves among their peers and compete, and to premiumise [sic] consumption
and the atmosphere in their premises.[92]
2.71
Similarly, Diageo Australia submitted:
Not only does [over-regulation] undermine the businesses
environment and restrict consumer choice, blanket measures such as lockouts or
spirit restrictions fail to offer a targeted approach to deal with the harmful
drinking of specific, at-risk groups. Rather, these blunt approaches penalise
the vast majority of Australians who drink responsibly and do not cause others
harm, because of the behaviour of a tiny minority.[93]
2.72
The committee notes that the NSW Bureau of Crime Statistics and Research
recently reviewed the effect of NSW's lockout and last drink laws. The
statistics show a significant decrease in non-domestic assaults in the affected
areas (Kings Cross and Central Business District entertainment precincts),[94]
however this corresponded with an increase in assaults in other areas (such as
Newtown, Bondi Junction and Double Bay).[95]
Packaged alcohol sector
2.73
Some submitters commented on the high level of regulation affecting the
packaged alcohol sector. For example, ALSA submitted:
The retail packaged liquor sector is one of the most highly
regulated sectors and one where there is considerable duplication and overlap
by varying levels of government. ALSA estimates ongoing compliance costs exceed
$6 million per annum.[96]
2.74
In particular, the Australasian Association of Convenience Stores
Limited highlighted one aspect of regulation—the non-participation of many small
businesses in the packaged alcohol market:
Existing regulations which prevent convenience stores from
participating in the packaged alcohol market are stifling competition,
preventing new employment opportunities from being created, and acting as a
barrier to significant benefits to the national economy.[97]
2.75
The Australasian Association of Convenience Stores Limited estimated
that this regulation costs well over $500 million in annual sales.[98]
APCO Service Stations Pty Ltd made similar comments:
Allowing convenience stores and petrol stations to sell
packaged alcohol would generate millions of dollars in sales in Australia,
particularly for small to medium size entrepreneurial business owners.
Currently, the packaged liquor market is dominated by the big two supermarkets,
being Coles Wesfarmers and Woolworths.[99]
2.76
APCO Service Stations continued:
...the deregulation of the sale of packaged alcohol is
essential to increasing competition in the market, ultimately benefiting the
consumer and small business. Australia is one of few countries in the world
that prevents the sale of alcohol through convenience stores, with many
American states and European countries allowing the sale of liquor (in some
form) from petrol stations and convenience stores. The red tape which prevents
Australian convenient stores and petrol stations from doing so is hampering
business productivity and [is] detrimental to consumers. [100]
2.77
The AHA did not agree with these views, with a representative stating
that deregulation would 'splinter' the mature package alcohol market.[101]
2.78
Nonetheless, the committee considers that competition should be
encouraged to enable the participation of small business and to promote
consumer choice. In this regard, the committee notes especially the evidence of
Timothy Andrews, Executive Director of the Australian Taxpayers' Alliance:
I do not believe it is necessarily the role of government to
put in restrictions to prevent one particular business from losing market
share. If a business in a free market ends up losing market share from
competition then perhaps that is an incentive...to innovate, to strive and to
provide better services. The government should not be picking and choosing
winners and trying to preserve one business at the expense of another.[102]
Reduction of alcohol red tape
2.79
Most jurisdictions have recently implemented,[103]
or are implementing,[104]
red tape reduction initiatives for the sale and supply of alcohol. However,
the committee heard that there has been little progress in reducing complex
regulation. In particular and for example:
-
there remains a universal need to streamline and simplify the
number of licences/permits, to enable business to better understand licence
conditions and ensure compliance; and
-
there are more instances of 'micro-regulation' that create even
greater complexity for business.[105]
2.80
DSICA submitted that greater complexity occurs as a result of 'bolt on regulation
often as a knee jerk reaction to a specific incident'. Its submission argued
that this complexity is counterproductive to achieving policy objectives, as
the incomprehensible regulation makes compliance and enforcement more costly
and difficult.[106]
The debate on the need for regulation and further action is
generally at odds with the facts–the vast majority of Australian drinkers enjoy
alcohol in a responsible manner and its sale provides a bedrock for an
ever-increasing range of hospitality businesses across the country. Where
regulation has been simplified we have seen the rapid development of diverse
vibrant and innovative businesses creating welcoming destinations for locals
and tourists alike. Where the heavy hand of regulation has been recklessly
applied, we have seen exactly the opposite.[107]
Committee view
2.81
This committee was established to inquire into the effect on the economy
and community of restrictions and prohibitions on business. In relation to the
sale, supply and taxation of alcohol, the committee heard that red tape
continues to affect business—particularly small business—with consequent
impacts on job creation, business growth and investment.
2.82
At the Commonwealth level, the committee heard that alcohol taxation is overdue
for reform and that this was the recommendation of the Australian Government's
2010 inquiry into Australia's Future Tax System Review. The committee
considers that the Australian Government should provide clear leadership on
this issue by establishing clear policy objectives for the taxation of alcohol
and by progressing taxation reform.
2.83
Based on evidence to the inquiry, the committee accepts that two
areas of such reform should include the introduction of a volumetric tax and
extended periods for the settlement of excise liability, to provide for
equitable, transparent and practical taxation in the industry.
Recommendation 1
2.84
The committee recommends that the Australian Government:
-
provide leadership on the issue of alcohol taxation by
establishing clear policy objectives for the taxation of alcohol; and
-
progress the reform of alcohol taxation, including:
-
introduction of a single volumetric tax rate across all alcohol
products, to be phased in to allow reasonable adjustment;
-
enactment of legislative changes to enable monthly settlement of
alcohol tax liability for big businesses and quarterly settlement of alcohol tax
liability for small businesses, with the Australian Taxation Office to be
granted discretion to further extend settlement periods based on trading terms.
2.85
The committee notes that the ATO has simplified the excise renewal
process for manufacturer and storage licences. The committee recognises that
red tape associated with this process could be further reduced if licence
applications could be made online. The committee acknowledges that a digital
platform is yet to be developed but recommends that the ATO move toward the
provision of online services as expeditiously as possible to facilitate
interactions between government and the alcohol industry.
Recommendation 2
2.86
The committee recommends that the Australian Taxation Office move toward
the provision of online services as expeditiously as possible, to facilitate
applications for manufacturer and storage licences, as well as movement
permissions, in respect of excise equivalent goods.
2.87
The committee acknowledges that most governments are currently involved
in red tape reduction initiatives. Recognising that there is a need to reduce
red tape at all levels, and mindful of the benefit of complementary
initiatives, the committee makes the following recommendation based on evidence
received throughout the inquiry.
Recommendation 3
2.88
The committee recommends that the Australian Government and COAG support
the sale and supply of alcohol through consideration and implementation of
evidence-based policies that aim to reduce red tape and promote job creation,
and business growth and investment, including:
-
recognition of Responsible Service of Alcohol certification
acquired interstate, whether through online or face-to-face training;
-
streamlining and simplification of liquor licencing systems to
reduce the number and types of licences/permits to a minimum viable level;
-
allowing packaged alcohol to be sold in convenience stores,
petrol stations and supermarkets;
-
abolishing restrictions on trading hours for liquor stores;
-
shifting resources toward targeted enforcement of existing
regulation, rather than a blanket approach of increased regulation for all
licensees;
-
developing liquor licensing fees based on empirical assessments
of risk, rather than social perceptions of risk.
Senator
David Leyonhjelm
Chair
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