AAWE Working Paper No. 170 – Economics

Excise Taxes on Wines, Beers and Spirits:
An Updated International Comparison

Kym Anderson

Executive Summary

This note seeks to compare across countries the various excise taxes that are applied to wholesale prices for wines and other alcohols. Many of those taxes are volumetric (x dollars per litre of product or of the alcohol therein) while only a few are ad valorem, such as Australia’s 29%. To make the specific taxes comparable with the ad valorem ones, it is necessary to nominate wholesale price points in a common currency (AUD) and average alcohol contents (12.5% for wines, 5% for beers, 40% for spirits).

We present two types of comparisons of what we call the consumer tax equivalent (both of which ignore the GST or VAT that might then also be added at the retail level). One is the percentage by which the tax raises the wholesale price at particular price points. The other is the number of cents by which the tax raises the wholesale price per standard drink (=0.0125 litres of pure alcohol).

The key messages to emerge from these comparisons are as follows:

• For commercial premium wines (the sort that would retail at AUD12), Australia’s 29% is the highest tax rate among the significant wine-exporting countries: the majority have zero taxes on such wines, France has 0.7%, South Africa 4%, the United States 6% and Canada 8%.
• At higher price points such as for super premium wines, only Korea and Norway among OECD countries have a higher tax rate than Australia’s 29%.
• When expressed in Australian cents per standard drink of alcohol, Australia’s wholesale tax for commercial premium wines (22 cents) is the same as New Zealand’s, but at any higher price point Australia’s tax exceeds New Zealand’s. That 22 cents in Australia compares with zero in Argentina, 3 cents in South Africa, 5 cents in the United States, and 6 cents in Canada – and just 1 cent in France and zero in the other Old World wine-exporting countries.
• That indicator for wines, when expressed as a percentage of those for other beverages, shows wines are taxed less than spirits in all but Japan, and are taxed at a similar or lower rate than beer in all but a handful of countries. Again, Australia is taxing wine relative to other alcoholic beverages more than most wine-exporting countries, the main exception being Chile where beer is very lightly taxed.