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Spirits Buoyed By Government’s Promise

19 January 2005

Spirits Buoyed By Government’s Promise

The Distilled Spirits Association* is cheered by news that the Government will act on its suggestion to review the Alcohol Advisory Council (ALAC) tax charged on alcohol beverages.

Following a Parliamentary debate of the Association’s submission on 15 December 2004, the Government has undertaken to review and make changes to the way the ALAC levy is applied, in the coming year.

“We put forward a case that a number of anomalies and flaws exist within the Levy regime, including its setting processes, product classifications and confusing rate structure that needs to be remedied,” says chief executive of the Distilled Spirits Association, Thomas Chin.

In its submission to the Subordinate Legislation (Confirmation & Validation) Bill (No 3), the Association urged that consideration be given to replacing the current ALAC levy product classifications with a system that charges by alcohol content.

“We simply proposed that the ALAC levy product classification be recast in bands based on alcohol content to better accommodate market developments and we’re thrilled that not only have we been heard, but that the Government has given an undertaking to act on those changes.”

“The current levy regime has not been reviewed since 1977, almost three decades ago. The drinks market has changed significantly since the levy regime was established. New alcohol beverage products now exist that contain varying amounts and types of alcohol, not anticipated by the Act.”

Changes need to be made to better reflect today’s marketplace and provide a future proofing for on-going product innovation and consumer preferences. It would also bring the ALAC levies into line with the alcohol excise tax regime administered by the NZ Customs Service.

The Association believes alcohol beverages commonly referred to as “ready to drink” (RTD) beverages, wine coolers, fruit wine, malt beverages, cider and other hybrid alcohol combinations, do not easily or accurately fit into ALAC’s existing product classifications.

For example, pre-mixed drinks, which typically contain 5%abv, are taxed higher and as if they were a “spirit containing less than 23% alcohol by volume”. This is regardless of the fact that “spirits”, as defined by New Zealand food law, must be made in a certain way and contain a minimum of 37%abv.

“For fairness, efficiency and simplicity, a pre-mixed drink should be levied at the same rate as “Beer” because they are similar and comparable in alcohol concentrations and often compete in the same market.”

“The Association expects the ALAC levy reforms to bring about a fair and level playing tax field and is looking forward to providing input on wider tax issues,” he concluded.


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