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The Brewers Association of New Zealand, Brewers Guild of New Zealand and Hospitality New Zealand have expressed concerns over the Government’s just released decision to increase alcohol excise tax by 4.1 per cent from July 1, 2024.
However, the associations recognise a broader government focus on reducing inflation to ultimately ease the cost pressures on businesses, potentially leading to moderate future alcohol excise increases. Furthermore, they acknowledge the Government’s clear signal of support for the hospitality sector through the appointment of a Hospitality portfolio.
The 2024 hike follows unprecedented increases of 6.92 per cent in 2022 and 6.65 per cent in 2023, amounting to a 17.7 per cent rise in just three years. Alcohol excise revenue totalled $1.29b for the 2022/23 government financial year meaning this year’s increase would add $52.9m tax to businesses and consumers.
“The brewing industry is disappointed by these continued and unsustainable excise tax increases,” says Brewers Association executive director Dylan Firth. “At a time when New Zealanders are grappling with a severe cost-of-living crisis, this move will undoubtedly harm local businesses and ultimately burden consumers further.”
While the alcohol excise tax, adjusted annually based on the Consumer Price Index year ending March, has seen record increases over the past three years, it has not proven to increase the revenue as projected by the government. In the 2022/23 fiscal year, despite a 6.65 per cent rate increase, the excise revenue was $1.29 billion ($443m from Brewing), $110 million lower than the forecasted $1.4 billion.
“It is deeply concerning that excise revenue fell short of projections, even after imposing a substantial rate hike,” Dylan says. “This raises questions about the effectiveness of such measures in achieving their intended goals.”
The associations are seeking to collaborate with the Government in crafting policies that foster a competitive and sustainable business environment while safeguarding the interests of consumers and the broader public.
“The hospitality sector is a vital part of New Zealand’s economy and social fabric, and we welcome the Government’s recognition of its importance through the appointment of a dedicated Minister with responsibility for hospitality,” says Hospitality New Zealand chief executive Steve Armitage.
“However, we share the concerns raised by the Brewers Association and Brewers Guild regarding the impact of excessive excise tax increases on businesses in our industry, and consumers. Against a broader backdrop of increasing costs, and given the hikes of recent years, we need to ensure excise increases return to a sustainable level to ensure the future viability of the industry.”
The associations note that general inflation, coupled with the added burden of significant excise increases, has driven prices up for consumers. The Selected Price Index shows that alcohol inflation has outgrown general inflation.
The compounding effect of excise tax increases has had a significant impact on the cost of beer for consumers. The amount of excise tax paid on a 50-litre keg of 5 per cent ABV beer has risen from $77.72 in 2021 to a projected $92.17 from July 1, 2024, representing approximately 32 per cent of the price paid by hospitality venues. When combined with GST, nearly half (47 per cent) of the price of a keg of beer is now tax.
“This unprecedented run of high annual tax increases taxation not only burdens consumers but also undermines the viability of our local brewing and hospitality industries,” says Dylan.
“Collectively, we have asked for a temporary freeze on further excise increases, and capping the annual indexation rate to 2 per cent, something the government can easily enact under the current regulatory regime,” says Brewers Guild of NZ executive director Melanie Kees.
“This allows the Government to strike a balance between generating revenue and supporting the growth and viability of the beer industry.”
“The craft beer sector is poised for growth and recovery as visitor arrivals increase and consumer confidence improves with the government’s focus on economic recovery.
“We would welcome government support in developing brewing and hospitality tourism initiatives to showcase the unique offerings of our local breweries and hospitality establishments.”
