Fieldings Folly

March 18, 2009 9:01 PM

Why, now that the Australian government's "Alcopops" tax has failed to pass, does the government owe liquor manufacturers money?

As I understand it, the intent of the tax was to make ready to drink "alcopops" (read: Southern Comfort and Coke in a big can) more expensive. And it did so - the price of these drinks increased, because consumers were paying the tax. Now that the tax bill has been rejected by parliament, there's a lot of talk about how 'all the tax collected has to be paid back to the liquor industry'.

But the liquor industry weren't paying the tax, were they? Or at least, they were passing it onto consumers. Surely consumers are the ones owed $300 million? As it is, it appears a tax was levied on a product for a period, and now the manufacturers of the product are allowed to collect all the proceeds of that tax.

What am I missing?

posted by Jimbob to Law & Government (12 answers total)

Did the liquor industry pay the tax on recorded sales, or did they raise prices on their products to cover the cost of the tax?
posted by Blazecock Pileon at 9:10 PM on March 18, 2009

You don't pay the tax separately, as a consumer. It's not like VAT. Accordingly, while they certainly raised the prices, that price rise was just a price rise, not tax paid by the consumer.

You've been had.
posted by pompomtom at 9:16 PM on March 18, 2009

Response by poster: They raised the prices of products to cover the cost of the tax, as far as I'm aware. The retail price of, say, a six-pack of teenage lolly water went from about $12 to $20 during the period the tax was in effect.
posted by Jimbob at 9:17 PM on March 18, 2009

Response by poster: Accordingly, while they certainly raised the prices, that price rise was just a price rise, not tax paid by the consumer.

So...they raised the prices, generating extra profit, which they then used to pay the excise. And they are now being refunded the excise, meaning they get to keep the extra profit they made during that period?

You've been had.

Not me personally. I only drink Coopers Stout.
posted by Jimbob at 9:19 PM on March 18, 2009

Best answer: technically, it was the liquor companies paying the taxes, through price rises passed on to the consumers.

ethically, they really owe the money back to the purchasers, but how could that ever be administrated? the only people who buy & drink alcopops are underaged girls, who certainly wouldn't have kept any purchase receipts, and couldn't even dig up old credit card statements, because they can't have credit cards at that age, either.

the only solution i could see would be for the liquor companies to emply legions of attractive promotions girls to wander the pubs and hand out free drinks to the punters. this would give gainful paid employment to the underage lasses, and restore the gross alcoholic product to the economy to make up for the drop in liquidity caused by the original price rise.
posted by UbuRoivas at 9:51 PM on March 18, 2009

ABC reports $300 million goes back to the retailers, yet the distillers are spending a portion of than on anti binge drinking advertising. Thanks to Steve Fielding and his woeful embarrassing performance.
posted by mattoxic at 10:51 PM on March 18, 2009

Wait, can I piggyback on this question and ask what happened? Why did the manufacturers raise prices in advance? Was the tax supposed to have applied retroactively if it passed or something?
posted by No-sword at 4:10 AM on March 19, 2009

The tax was levied based on legislation that had an "expiry date" (not sure of the technicalities) and which depended on the bill just defeated to make it strictly legal. Because the bill failed to pass in the senate, that invalidated the original legislation, making the tax retrospectively illegal, so the government has to refund it to the manufacturers, where the tax was levied. The manufacturers had no obligation to pass the tax to the consumers, as it was not a consumption tax but, surprise, surprise, they passed it on in the form of a price increase, not as a tax (GST is an example of a tax levied at the consumer level).

Because the tax was paid by the manufacturer, not the consumer, there is no legal obligation on anyone to refund anything to the consumer. From what I've heard, the manufacturers (via their industry body) are saying that the government shouldn't give the money back, but should use it to run promotions for "sensible drinking" campaigns.

It's certainly not the case that only underage girls drink the products that have been dubbed as "alcopops" for the purpose of this tax - lots of mature people drink them, particularly the spirits-based pre-mixed drinks such as bourbon and coke. That's the reason the tax bill failed, I think - it clearly didn't target the intended group, but hit Joe (or Jocelyn) Average instead. It was a stupid tax and should never have been passed. I'm glad it failed and the government deserves whatever egg ends up on its face for making a knee-jerk decision that was not even thought through enough to be considered poorly thought-out.
posted by dg at 4:34 AM on March 19, 2009

Response by poster: I think I understand it, but it's a strange situation. If a tax is intended to be a "vice tax" and deliberately raise prices to discourage purchase, surely it should be levied at the consumer level rather than the manufacturer's level, so situations like this don't occur? Weird.
posted by Jimbob at 6:02 AM on March 19, 2009

Perhaps because adding it as a consumer tax would be seen as "another GST" and because directly taxing the consumer twice on the same purchase is politically unacceptable?
posted by dg at 1:52 PM on March 19, 2009

Response by poster: and because directly taxing the consumer twice on the same purchase is politically unacceptable?

*cough* petrol, smokes *cough*
posted by Jimbob at 2:47 PM on March 19, 2009

You know, if you didn't smoke so much, you wouldn't cough like that;-)

Yeah, certainly cigarettes have a double tax on them but, again, I think it is not levied on consumers directly, although they obviously are the ones that end up paying. Taxing smoking is a pretty safe bet socially and politically, too. Additional taxes on fuel vary from state to state and I think the main culprit there is various levies (ie "not taxes", but a levy for a specific purpose like road safety) that states apply at the point-of-sale. It's a fine line, sure, but there is a line nonetheless. We don't pay any state levy on fuel in Queensland, so I don't care about that ;-)
posted by dg at 3:15 PM on March 19, 2009