Hypocritical level playing field & tax

Tax and sin

The UK Taxpayers’ Alliance (TPA) recently put forward the suggestion that “sin taxes” have cost the UK Treasury £31 billion ($52 billion) in the past five years through black market trade and lost income tax.

As with various health lobbies around the world, the figures support the argument that the alliance wants to put forward.

The TPA argues that if tax on alcohol were lowered, black market trade would be reduced. It says between 2010 and 2015 the following income tax was lost:

  • Cigarettes: £13.9 billion
  • Spirits: £5.8 billion
  • Wine: £3.5 billion
  • Beer: £3 billion
  • Diesel fuel: £4.8 billion

Tobacco, spirits, beer and wine have been accused of damaging people’s health. It’s been proved that tobacco is health damaging. With beer, spirits and wine there is some doubt, as the truth lies in the amount consumed.

The question being: how big a role does tax play in health prevention and black market operations?

Prohibition (1920-33) in America is said to have cost the government US$11 billion in lost taxation (US$205 billion, or A$275 billion, today).

Not only did the US government lose US$11 billion in income, but prohibition is said to have cost more than US$300 billion to enforce. As well as the increased crime and violence associated with it, there were other losses.

There was an expectation that Americans would seek other ways to enjoy themselves. It was expected they would continue to dine out, in fact more often, with the whole family enjoying time to gather over food and soft drink. They didn’t.

Soft drink and fruit juice companies expected a vast increase in sales as they would be the alternative beverages. It never happened.

Take away the local salon, along with the rowdy customers, and property prices in the vicinity would increase. That didn’t happen either.

With no bar to go to, surely people would flock to the theatre or cinema? It wasn’t to be. In fact, taking alcohol out of the reach of the people left a depressed and opposed society. Life in America sank into dullness.

History has shown that prohibition does not work, that the criminal element rises to the surface and black market operations come into play. Fear, interspersed with excitement at being involved in something naughty, takes centre stage.

The TPA says:

“The difference between the amount due and the amount actually collected would be enough to fund a 1.5p cut in the basic rate of income tax, which is currently 20 per cent for those who earn up to £31,785.”

Let’s leave the TPA there, as its argument fell on deaf ears. Chancellor of the Exchequer Philip Hammond presented his Autumn Statement on November 23. What he didn’t include was as important as what he said.

There was ominous silence on any proposed increases on alcohol, which has left the UK trade wondering if there will be a freeze or increase, and what that increase might be.

Moving across the Atlantic, the US is also in quandary about alcohol taxation. The Distilled Spirits Council of the United States (DISCUS) is pressing Congress to reform the federal excise tax on spirits, beer and wine.

What it wants is the same as Australian distillers and brewers: equal tax across all categories of alcohol. Which in essence means spirits come down and wine goes up.

The Australian wine industry and its official bodies often bemoan the high tax on wine in this country. Yet making news in most media this week is Coles $5 Big & Bold Shiraz 2015, which was named best wine under $20 from Australia and New Zealand at the Winestate Wine of the Year Awards.

The simple table below shows how many wines that four Australian retailer brands from two companies were stocking according to their websites on Wednesday, November 30, using the simple search of red, white and sparkling wines $10 and under. It does not take into account container size, such as cask, half bottle or piccolos.

Coles First Choice 344
Coles Liquorland 145
Woolworth Dan Murphy’s 659
Woolworths BWS 151

It doesn’t take a great deal of thought to understand there is good argument for tax increases if you’re approaching the issue from the health lobby point of view.

What is harder to understand is why there is so much wine around at $10 or less while grape growers are not receiving enough per tonne to live and reinvest.

Is there not logic in saying that the minimum price for a bottle of 75cl wine in Australia should be $10? The extra money raised could go to growers and others in the industry to reinvest, rather than the government via tax.

This cannot be. Australia is a free democracy that has free business competition. Surely that is the level playing field so often pleaded for.

There is a lot of tosh when it comes to the expression “level playing field”. This is from The Mercury, November 23, on the opening of a Dan Murphy’s store in Tasmania:

“Tasmanians are being urged to support local pubs and clubs amid fears that large-scale booze warehouses will cost local jobs.

“The Tasmanian Hospitality Association has raised concerns about the impact of big box-style bottle shops, such as Dan Murphy’s, on smaller retailers.”

It’s not just Dan’s. There are no First Choice, Liquorland or Aldi stores in Tasmania. It looks as if the citizens of Tasmania are to be denied Coles $5 Big & Bold Shiraz 2015 or any Aldi specials.

When it comes to alcohol, including wine, hypocritical is the word that comes to my mind. The selfish pettiness will lead alcohol into tax traps that health lobbies can exploit and governments will impose.

Seek the level playing field within your own life this coming week. You may find it harder then you thought.

Tony

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