AHA Henry price modelling April 2010

8/7/2019 AHA Henry price modelling April 2010

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tax on alcohol

Henry Review


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Henrys Volumetric Excise ProposalHenry proposes

a single rate of tax (excise) to be applied to the alcohol content of all beverages.

factors that determine the impact of Henrys recommended excise on any alcohol based

alcohol content (expressed as a %) and the size of container (volume).

the product brand or beverage type has no influence. Henrys recommendation treats a

alcohol.

The formula used to calculate excise is:

total volume of product (litres) X alcohol strength as a % X excise tariff rate (Henry recommends $41.68)

GST Implications GST is directly applied to producer, wholesaler and retailer margins and

therefore is also calculated on the excise component embedded in the

price.

Henrys recommendation is positive revenue generating (not cost neutral)

therefore GST revenue will increase significantly on many products.


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The following modelling calculations reflect

Removal of the Wine Equalisation Tax (WET)- currently 29% of wholesale, and replaced

volumetric tax (currently the rate applied to full strength packaged beer). It assumes no

The current 1.15% beer tax free threshold on all beer being removed The draught vs. packaged differential being removed

AnalysisWine

Tax savings become progressively greater on wine that currently retails above

approximately $27 i.e. the more expensive the wine the greater the tax savings.

Conversely, tax increases progressively on wine retailing for less than $27, thecheaper the wine the greater the tax increase relative to the current tax structure.

At about $27 retail current WET + GST = proposed Excise + GST.

The excise rate ($41.68) is applied to alcohol content not wholesale pricing (WET)

e.g. the excise tax applied under Henrys recommendation on a Penfolds Grange

at 13.5% alc/vol is the same as a sub $27 retail wine of the same alcohol content.

Impact of Henrys Recommended Volumetric Ta


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Impact of Henrys Recommended Volumetric Ta

Beer

If the 1.15% excise exemption currently available on all beer is removedthere will be higher excise recovery and an additional GST windfall on all

beer products (draught and packaged and light to full strength).

With the draught vs. packaged differential removed, draught (on-premise)

product will increase in price significantly relative to same strength packagedbecause higher margins are applied to draught products reflecting higher on-

premise occupancy, dispensing and employment costs.

Spirits

Under Henrys proposal spirits and spirit based product drop in pricesignificantly. It remains to be seen if that is politically achievable.

Wine (cont.)

As a consequence there will be a reduction in GST collection on current $27 plus retail psignificant increase in GST recovery on sub $27 wine particularly casks. Note that GST

the excise component embedded in the retail price i.e. a tax is applied on a tax.


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$70.61 $70.61

$41.68 $41.68

$35.77

$29.34

$22.42

$7.14$10.33

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

Spirits RTD/Spirits Full Beer(packaged)

Mid Beer(packaged)

Light Beer(packaged)

Full Beer(draught)

Mid Beer(draught)

Light Beer(draught)

Wine

Current Non GST Tax on Alcohol

These excise rates are as at February 2010

Excise WET

excise not applied to first 1.15% of alc/vol of beer (no exemption for spirits

estimated average collect overall based on WET rebates, bulk and bottled product etc

the WET rate is 29 per cent of the wholesale sale value. Henry recommends a standard $41.68 excise rate across all alcohol based product

on-premisePackaged/off-premise


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Impact of Henrys Recommended Volumetric TaThis analysis uses the brands below as a representative cross section of popular alcohol products in terms of s

and alcohol content. It is the alcohol/volume (%) and product volume that determines the tax outcome not the

type.Product Alcohol/Volume % Recommended.

Price*

Johnnie Walker Red Label Whisky - 700 ml 40% $43.19

Johnnie Walker Red Label Whisky - 30 ml Nip (on-premise) 40% $5.90

Penfolds Grange Shiraz - 750 ml 13.5% $621.45

Penfolds Bin 407 Cab. Sauvignon - 750 ml 14% $54.32

Shaw & Smith Sauvignon Blanc - 750 ml 13% $27.00

Richard Hamilton Sauv. Blanc Semillon - 750 ml 12.5% $14.73

Orlando Carrington Blush/Brut - 750 ml 11.5% $7.10

Morris Fresh Dry White - 4 litre cask 12% $14.75

Hahn Premium Light - glass 285 ml (on-premise) 2.6% $3.97

West End Draught - glass 285 ml (on-premise) 4.5% $4.29

Cascade Premium Light - 24 x 375 ml cans/bottles 2.8% $39.53

Victorian Bitter - 24 x 375 ml cans/bottles 4.6% $47.94


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$11.32 $11.32 $11.32

$19.77

$11.67 $11.67

$8.17

$8.17 $6.04

$3.93

$3.12$2.90

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00$45.00

$50.00

Current $70.61 excise $41.68 excise - samecash margin

$41.68 excise - same %margin

Johnnie Walker Red Label Whisky700 ml bottle 40% alc/vol retailer margin 20.8%* - recommended retail $43.

$43.19 retail $34.28 retail-$11.26-$8.91

$31.93 retail

* Licensees Liquor Guide March 2010


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$0.49 $0.49 $0.49

$0.85$0.50 $0.50

$4.02$4.02

$2.97

$0.54$0.50

$0.40

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

Current $70.61 excise $41.68 excise - samecash margin


Johnnie Walker Red Label Whisky Nip30 ml Nip 40% alc/vol - retailer margin 75%* - recommended on-premise price $

$5.90 retail $5.51 retail-$1.54


-$0.39

$4.36 retail


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$316.67 $316.67

$91.83$4.22

$156.46

$122.90

$56.47

$44.38

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

Current WET Proposed EXCISE

GST

Ret

WE

Wh

Penfolds Grange Shiraz750 ml bottle 13.5% alc/vol - retailer margin 27.7%* - recommended retail $62

$621.45 retail $488.17 retail - $133.28



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$27.67 $27.67

$8.02 $4.38

$13.67$12.28

$4.94$4.43

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00


GST

RetaiWET/

Whol

Penfolds Bin 407 Cab. Sauvignon750 ml bottle 14% alc/vol - retailer margin 27.7%* - recommended retail $54.

$54.32 retail $48.76 retail -$5.56 (1



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$13.75 $13.75

$3.99 $4.06

$6.80 $6.82

$2.46 $2.46

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00


GST

RetWE

Wh

Shaw & Smith Sauvignon Blanc 2009750 ml bottle 13% alc/vol - retailer margin 27.7%* - recommended retail $27.

$27.00 retail $27.09 retail +$0.09 (



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$7.50 $7.50

$2.18$3.91

$3.70

$4.37$1.34

$1.58

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00


GST

Reta

WET

Who

Richard Hamilton Sauvignon Blanc Semillon750 ml bottle 12.5% alc/vol - retailer margin 27.7%* - recommended retail $14

$14.73 retail $17.36 retail +$2.63 (1



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$3.61 $3.61

$1.05

$3.59$1.80

$2.76

$0.64

$1.00

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00


GST

Reta

WET

Who

Orlando Carrington Blush/Brut750 ml bottle 11.5% alc/vol - retailer margin 27.7%* - recommended retail $7.

$7.10 retail $10.96 retail +$3.86 (



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$0.66 $0.66 $0.66$0.03 $0.31 $0.31

$2.91$2.91

$4.09

$0.36$0.39

$0.51

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Current $7.14 excisewith 1.15% exemption

$41.68 excise - samecash margin

$41.68 excise - same% margin

GST

Reta

Exci

Who

Hahn Premium Light Draught 285ml Glass Consumed On-Pre2.6% alc/vol - retailer margin 80.8%* - recommended on-premise price $3.97

$3.96 retail $5.57 retail+$1.60c

$4.27 retail+.30c



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$0.70 $0.70 $0.70

$0.28 $0.53 $0.53

$2.92$2.92

$3.67

$0.39$0.42

$0.49

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00




G

R

E

W

West End Draught 285ml Glass Consumed On-Premise4.5% alc/vol - retailer margin 74.8%* - recommended on-premise price $4.29

$4.29 retail $4.57 retail+.82c+.28c

$5.39 retail



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$24.84 $24.84 $24.84

$5.32$10.50 $10.50

$5.32

$5.32 $6.24$3.55$4.07

$4.16

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00




GST

RetaExcis

Who

$1.86

per unit

Cascade Premium Light 24 x 375ml Can/Bottle2.8% alc/vol - retailer margin 15%* - recommended on-premise price $39.53* (no SA C

$39.53 retail $44.73 retail+$6.21+$5.20

$45.74 retail

$1.65

per unit

$1.90

per unit



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$23.72 $23.72 $23.72

$12.94 $17.26$17.26

$6.47$6.47 $7.23$4.31$4.75 $4.82

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00




GS

Re

Ex

Wh

Victorian Bitter 24 x 375ml Can/Bottle4.6% alc/vol - retailer margin 15%* - recommended on-premise price $47.94* (no SA C

$47.94 retail $52.20 retail+$5.09+$4.26

$53.03 retail

$2.00

per unit

$2.18

per unit

$2.21

per unit



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-$11.26

-$1.54

-$5.56

$0.00

$2.63$3.86

$25.94

$1.60 0.82c 0.25c

-$15.00

-$10.00

-$5.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Comparison of Henrys recommended $41.68 volumetric tax on cupricing

Note: this chart preserves current approximate retail % margins as at April 2

Spirit700ml$43.19(currentRetail)

Spirit Nip30ml$5.90

WineBottle750ml$54.32

WineBottle750ml

$27

WineBottle750ml$14.73

BrutBottle750ml$7.10

WineCask4Litre

$14.75

LightDraught

Beer

285ml

FullDraught

Beer

285ml

LightBeer

Stubby375m


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Total tax reduction on Penfolds Grange Shiraz 750 ml 13.5% alc/vol Henrys recommendations = $99.72

-$87.61 -$99.72

-$33.56

-$12.11

-$150.00

-$100.00

-$50.00

$0.00

$50.00

$100.00

Reduced Excise Reduced Retailers Margin Reduced GST

total tax

reduction


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-$99.72

-$4.15

$0.00 $1.90$2.79

$

-$100.00

-$80.00

-$60.00

-$40.00

-$20.00

$0.00

$20.00

Comparison of additional tax collect on wine as a result of Henrys re$41.68 volumetric tax

Note: chart shows additional tax only

new excise and subsequent GST on

additional excise tax component o

Penfolds

Grange

750 ml

13%

$621.45*

Bin 407

Shiraz

750ml

14%

$54.32*

Sauvignon

Blanc

750ml

13%

$27*

Sauv. Blanc

Semillon 750ml

12.5%

$14.73*

Carrington

Blush/Brut

Sparkling

750ml

11.5%

$7.10*

W

*current retail price as per Licensees Liquor Guide


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A Consumers Perspective


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The Sydney Morning Herald 27th January 2010 page 29

And the power of the beer, clubs and pubs lobby groups cannot be underestimated. Beer is the most popular alco

Australia and full- strength beer in particular tends to be the preference of Labor's core voters.

Howard tried to change beer tax with the introduction of GST but quickly backed down when the Coalition recognised

associated with a campaign that harnessed the power of the beer drinking public. The beer lobby put together the

Australian political history in encouraging beer drinkers to have their shout.

AHA Henry price modelling April 2010

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