The government has announced that there will be a 6.65% increase to the alcohol excise tax next month that brewers are warning will lead to higher prices and the possible demise of boutique breweries and wineries. The tax has been increased on an annual basis for more than 30 years, with the latest announcement being the second-highest hike during this period.
Despite the added pressure that this hike will have on producers and consumers, the government is adamant in pushing it forward. Prime Minister Chris Hipkins said that though no one liked the idea of the price of wine and beer going up, it was a consequence of inflation rising. He added that with the reduction in certain levies in the sector, money had to be found elsewhere.
The Brewer’s Association of New Zealand is however concerned that the increased tax may prove very difficult for some of its producers in the industry. According to the association’s executive director, Dylan Firth, the hike is expected to result in about $30 million in additional costs to the system that producers will likely pass on to consumers at the pubs and shops. He indicated that there had been attempts to engage with the government on the matter and had been hopeful that the tax would be increased to a smaller extent.
Firth further added that much of what people were paying for beer was made up of taxes. He estimated that the next purchases of beer by Kiwis will likely have 50% of the price made up of excise tax and GST. He noted that with the anticipated increase in beer prices, it would become that much less affordable for people to enjoy a tipple.
Brewers Guild executive director, Melanie Kees, pointed out that other countries had opted for tax relief that had positively impacted small businesses. She highlighted the case of the UK which not only froze excise tax hikes for several years but also provided a 10% relief for keg beer sold at hospitality establishments to help offset inflationary pressures.
The new tax increase has added to woes in the industry, coming just a year after the record-high hike of 6.9% which was applied in 2022. Firth is concerned that as the country’s tourism picks up with the reopening of borders, the country may be perceived as “the land of the unaffordable pint”.
However, for alcohol harm reduction activists, the tax hike is seen as a blessing. Alcohol Healthwatch’s Rebecca Williams acknowledged that the increase could be a targeted and cost-effective means of minimising correlated harm. She also said that the hike was not unexpected by the industry, which could adapt to the change. Alcohol Action NZ has also expressed satisfaction with the hike.
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