David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I present the interim report of the Senate Select Committee on Red Tape, titled Effect of red tape on the sale, supply and taxation of alcohol, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

I move:

That the Senate take note of the report.

The committee, which I chaired, heard extensive evidence confirming that red tape is death by a thousand cuts. Each individual regulation or piece of red tape can seem quite simple—it is just one extra form or one extra requirement—but it adds up to a substantial burden over time. The committee learnt that across Australia there are no less than 62 different types of licences and 24 different types of permits for businesses to acquire if they want to serve alcohol.

We learnt that in New South Wales, after certain hours, small bars cannot serve a classic martini or a negroni, and premium whiskey costing up to $100 a nip cannot be served without the addition of a mixer. Whiskey connoisseurs view this as the equivalent of blasphemy. It certainly serves no public benefit. We learnt that a family business operating 18 liquor stores across New South Wales, with no recorded infractions, is required to close at 10 pm and pays 140 per cent more in fees than a large-capacity nightclub venue in the Sydney CBD precinct that operates until 3 am. The committee also learnt that in a typical Queensland pub or club, after 1 am, you can order a bottle of wine, which comprises seven standard drinks, or a jug of beer, which comprises about four standard drinks, but not a single serve of whisky on ice, which is one standard drink.

The licences, fees and restrictions mean that businesses are not free to operate, evolve and improve. Some businesses respond by just leaving the industry. Based on this evidence, the committee recommends that the Australian government and COAG first consider reductions in restrictions including allowing packaged alcohol to be sold in convenience stores, petrol stations and supermarkets, and abolishing restrictions on trading hours for liquor stores. To reduce the burden of the remaining regulation, the committee recommends the streamlining and simplifying of liquor licencing systems to reduce the number and types of licences or permits to a minimum viable level and recognition of responsible service of alcohol certification acquired interstate, whether through online or face-to-face training. To avoid a worsening regulatory environment, the committee recommends a shifting of resources away from the creation of new regulation applicable to all and towards the targeted enforcement of existing regulation. And, to address concerns about fees, the committee recommends that liquor licensing fees be based on empirical assessments of risk rather than social perceptions of risk.

The committee also heard that much of the red tape burden in the industry arises from the tax system. In 2016, the OECD reported that Australia was the third-highest alcoholic beverage taxing country among its member countries. This explains why Australian alcohol is often cheaper when purchased overseas. Taxation is not only high but also confusing, thanks to two taxation systems that provide for 16 tax rates and various concessions. This leads to numerous illogical outcomes and great variation in the amount of alcohol tax paid for each standard drink, which can range from $1.06 to $30 per serve of alcohol.

According to the Distilled Spirits Industry Council of Australia a case of a certain type of ginger beer is subject to $21.54 of excise tax, while the same sized case of a similar ginger beer is subject to only $8.70 of wine equalisation tax because it is characterised as 'a fruit or vegetable wine'. This is despite the fact that the ginger beer subject to excise tax is 4.5 per cent alcohol by volume whereas the ginger beer subject to wine equalisation tax is eight per cent alcohol by volume.

MyChoice Australia told the committee that the different rates of tax disproportionately affect small business. Small distillers and brewers face particular discrimination from the tax system not just with respect to the differing tax rates but also with respect to their engagement with the tax office. The Australian Hotels Association said that the different rates of tax do not support harm minimisation. For example, the 'alcopops' tax was encouraging young people to buy large bottles of spirits and 'preload' on them rather than buy measured prepackaged bottles of alcohol.

The committee heard from numerous organisations that the policy objectives for alcohol taxation are not clearly or consistently articulated and that the policy mechanisms have not always been effective. This was remarked upon not just by industry representatives but also by groups such as the Royal Australasian College of Surgeons and the Institute of Public Affairs. As a representative from the IPA rightly pointed out, public policy should be based on an agreed objective so you can create effective policy mechanisms. The reasoning is that, if there are social costs, then there may be a role for government to correct those social costs. However, for alcohol there is no agreement on the costs, and estimates vary by billions of dollars.

Inquiry participants argued that alcohol taxation should target alcohol content rather than the mechanism by which the alcohol is delivered, because 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 the type of drink in which the alcohol is found. This is in line with the recommendations of the 2010 Henry tax review. This view was supported by the Northern Territory government, which identified a volumetric tax on alcohol as an effective measure to complement its targeted harm minimisation initiatives.

Based on this evidence 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: introducing a single volumetric tax rate across all alcohol products to be phased in to allow reasonable adjustment; enacting legislative changes to enable monthly settlement of alcohol liability for big businesses and quarterly settlement of alcohol liability for small businesses, with the Australian Taxation Office to be granted discretion to further extend settlement periods based on trading terms; and the Australian Taxation Office moving toward the provision of online services as expeditiously as possible.

The retail liquor industry employs 47,800 people. It supports thousands of small businesses, which annually contribute over $17 billion in sales activity and $5.1 billion in various taxes to government. The industry is overseeing a general trend towards lower alcohol consumption and less binge drinking. The number of people in Australia drinking at levels that place them at lifetime risk of an alcohol-related disease or injury fell by approximately 250,000 in the three years up to 2013. More people are choosing quality over quantity. There are also increasing numbers of people abstaining altogether. This suggests that more Australians are drinking in moderation and that regulations should target those who are at risk rather than the vast majority of responsible drinkers.

As the Distilled Spirits Industry Council told us, 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 the sale of alcohol provides the foundation for an ever-increasing range of hospitality businesses across the country. The industry deserves a reduced red tape burden. I encourage anyone who is interested to read the interim findings of the red tape inquiry on the sale, supply and taxation of alcohol on the APH website. You will find it instructive.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I want to begin by congratulating Senator Leyonhjelm. I had the opportunity to be the deputy chair for this Senate Select Committee on Red Tape inquiry. I have spent the past few years of my time in the Senate participating in inquiries with Senator Leyonhjelm. We have at times dealt with alleged football hooligans and become experts in the use of flares. We spent a day in Newtown. It was falsely sold to me by Senator Leyonhjelm, who said, 'Let's spend the day on marijuana.' It turned out to be an inquiry about law reform. More recently there has been this inquiry on the sale and distribution of alcohol. I know Senator Leyonhjelm is searching for an alleged football hooligan who uses marijuana and likes to drink some alcohol—that I believe would be his ultimate voter!

Joking aside, on a serious note I encourage people to take a little bit of time to read this report. It shows just how ridiculously complex the taxation system has become when it comes to the sale and distribution of alcohol. Obviously this is not an easy problem to fix. Let us not kid ourselves. There is the politics around the WET, the politics around the beer industry and the politics around the spirit industry. If anyone were to design from scratch a taxation system around alcohol, the idea that you would have a different structure for a standard drink of wine compared to a standard drink of beer and a vodka and rum, a vodka and beer or whatever—

Louise Pratt (WA, Australian Labor Party, Shadow Parliamentary Secretary for the Environment, Climate Change and Water) Share this | Link to this | Hansard source

You would never do that.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

You might not, but I come from the Western suburbs of Sydney.

Concetta Fierravanti-Wells (NSW, Liberal Party, Minister for International Development and the Pacific) Share this | Link to this | Hansard source

Now, now, now, Sam.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I'm the westie here.

Senator Smith interjecting—

The Western Australians do not count. According to an email I got from Senator Rod Culleton, there are questions about whether you are part of Australia.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Senator Smith on a point of order.

Dean Smith (WA, Liberal Party) Share this | Link to this | Hansard source

I find myself in furious agreement with Senator Dastyari so perhaps we could let him continue.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

That is not a point of order. Senator Dastyari.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

What Senator Leyonhjelm has identified here is the complexity around the taxation arrangements for alcohol. It was quite fascinating. You are looking at a tax regime which can be up to four times more depending on the type of beverage. The fact that a beer is taxed differently to a cider is strange. I want to go to the example Senator Leyonhjelm touched on. In a premium liquor establishment in Sydney—somewhere like the Baxter bar, which I am told serves whisky up to $150—after a certain time at night you cannot have a straight Scotch. It has to be mixed with another drink. Again it is logical. It makes sense. Clearly at some point in time they decided as a policy initiative that they did not want people having excessive shots of alcohol after a certain time, but the practicality of this has become ridiculous.

Again I do not think it is something that is going to be acted on quickly.

The question you have to ask yourself is: considering the egg has been so scrambled, is there a way to reasonably unscramble it and have a taxation system that achieves the goals that it wants to achieve? I think there are two goals, really. There is looking at the harm that alcohol does and can cause and how is revenue raised to counteract the services that have to be provided because of that, while giving people the freedom to be able to participate in leisurely activities? Let's not kid ourselves. Alcohol used for right or wrong—and it is mostly used for right—is certainly part of the Australian identity and Australian culture, and we should not shy away from that. However, that brings with it some very real challenges.

The question that this report raises is: if you have a taxation system that has so fundamentally failed meeting the objectives that it wants to meet, why is it that wine is being taxed differently from spirits? When you have an incredible spirit industry being built out of a place like Tasmania and when you have, in Western Sydney, in Huntingwood, most of the premium drinks being bottled and 250 people in good manufacturing jobs, how do you resolve these challenges? We are all politicians. We can be honest. We all know that the politics around an issue like the WET is very, very difficult.

Senator Leyonhjelm, unfortunately, I do not believe it is something that is going to be resolved easily or quickly, but I do think the report that the committee has done is a step in the right direction, at least in highlighting these problems. I seek leave to continue my remarks.

Leave granted; debate adjourned.