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Cut the harm, but at what price?

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The AMA, public health experts and some industry groups back an increase in the cost of alcohol amid mounting evidence that making it more expensive will help curb consumption.

The AMA National Alcohol Summit was told that 112 academic studies have found that changes in the price of alcohol effect its consumption, lending support to the AMA’s call for a review of current taxation arrangements.

Addiction medicine specialist Professor Paul Haber from the Royal Australasian College of Physicians, said the country was effectively subsidising the alcohol industry because the $9 billion raised in alcohol tax revenue each year was little more than half the annual cost of the burden of disease it created.

The Wine Equalisation Tax (WET), which encourages the production of large quantities of cheap wine, is the prime target of those seeking reform of alcohol taxation.

The WET is a tax applied based on the value of wine, and is applied at the rate of 29 per cent of the wholesale price charged. The tax is complemented by a scheme under which wine producers are entitled to an annual WET rebate worth up to $500,000.

Public health experts such as the Foundation for Alcohol Research and Education argue that, because the WET is levied according to value rather than alcohol content, it favours the production of cheaper, higher alcohol content wine.

“The place to begin reform is the WET,” according to FARE Chief Executive Michael Thorn. “Tax and price reform is the number one priority. Ten Government reviews have recommended changes to the way alcohol is taxed.”

Among the critics of the WET is the Winemakers’ Federation of Australia. Federation Chief Executive Paul Evans told the Summit that the WET encouraged the production of bulk and unbranded wines, creating an oversupply in the market that helped drive deep discounting and retail consolidation.

“Wine is too cheap,” Mr Evans said. “The industry agrees with you on that one.”

The Brewers Association of Australia and New Zealand also wants the WET scrapped.

“The current WET system provides wine with a significant advantage over other alcohol categories, and creates industry distortions,” the Association said. “The current WET regime provides an incentive for wineries to produce low value, high strength products [and] the Brewers Association recommends that Government implement changes to the taxation treatment of wine by incorporating wine into the category-based approach.”

A study published in the Medical Journal of Australia last year (https://www.mja.com.au/journal/2013/199/9/estimated-impacts-alternative-australian-alcohol-taxation-structures-consumption) found that axing the WET and replacing it with a volumetric tax on wine would raise an extra $1.3 billion a year in revenue, cut alcohol consumption by 1.3 per cent and deliver an annual $820 million saving on health expenditure.

Some have suggested any reform of alcohol taxation arrangements should go further.

Both the National Preventative Health Taskforce and the Henry Tax Review condemned the current system – which taxes wines, beers and spirits at different rates – as incoherent and flawed, both from an economic and public health perspective.

The Henry Review proposed that it be replaced with a volumetric tax on all alcoholic beverages, applied at the same rate of tax per litre of alcohol across all beverages.

Peoples Alcohol Action Coalition representative Dr John Boffa told the Summit that, rather than a volumetric tax, it would be more politically feasible and effective to introduce a minimum price regime because it would increase the cost of beer.

Mr Thorn said minimum unit pricing was “a critical part of the debate”.

Adrian Rollins