‘Pathetic’ alcohol tax hike only adds less than half a cent to the price of a can of beer

Alcohol taxes have been increased, but by less than half an amount to cover inflation.

Cabinet agreed to increase alcohol tax for the first time since 2009 to fund alcohol harm reduction measures.

The change means the tax will increase from $11.5 million to $16.6 million, an increase of less than half a cent on the price of a standard can of beer.

Cabinet rejected the recommendations of an independent review by consultancy Allen + Clarke that recommended the levy be increased to $37 million.

The report said taxes would need to increase to $21.5 million just to account for inflation.

The review of alcohol taxation also sought to quantify the cost of alcohol harm in New Zealand.

The new figure is $9.1 billion, according to analysis by the New Zealand Institute of Economic Research (NZIER).

Steve Randerson from the New Zealand Health Alliance said the tax increase was not enough compared to the harm caused by alcohol.

“It’s pathetic. Harm on this scale does require proper regulation of alcohol,” he said. “Taxation can complement this and support community-led harm reduction programs. But it certainly needs a bigger boost than we’ve seen.”

How much is the tax on alcohol?

An alcohol tax is a dedicated tax specifically designed to fund public health measures to reduce alcohol harm. It represents a small fraction of the price of alcohol – between 0.2% and 1.3%.

This levy is separate from the alcohol excise tax, which ranges from 20% to 55% of the price of alcohol. The alcohol excise tax generated $1.3 billion in revenue in 2023. The funds go toward general government spending.

The Allen + Clarke report said failure to adjust alcohol taxes for inflation had resulted in a $10 million shortfall. Raising taxes to $21.5 million to cover inflation would increase the price of a standard can of beer by 0.5 to 1 cent.

But the report prefers a tax increase of $37.3 million, which would increase the price of a can of beer by 1.1 cents and a bottle of wine by 7 cents.

Instead, the government chose to increase the levy to $16.6 million.

The report said the tax had not increased over the past decade for “pragmatic and potentially political reasons” rather than “based on a systematic assessment of demand for services”.

Randerson said any price increases for consumers would be small.

“It’s absolutely negligible. I don’t think anyone would notice if it affected the price you pay in a supermarket or a bottle shop,” he said. “So it’s not a budget issue. It’s probably an ideological issue – it’s hard not to conclude that.”

Randerson is concerned that the alcohol industry is being consulted in the tax review. “We are firmly opposed to any move to bring the harmful product industry into a harm reduction direction. It’s not in their interest and they don’t support it.”

Alcohol taxes are mainly used to fund the Health Promotion Board.

It does not fund treatment services, but does fund peer support programs for people with alcohol dependence.

The levy also funds a range of other measures, including the Community Law Alcohol Harm Reduction Project, which aims to give deprived areas a say and prevent their communities from being overwhelmed by alcohol outlets.

It also funds sports clubs to remove alcohol sponsorship and advertising, and supports health promotion.

The cost of alcohol harm

According to the Allen + Clarke review, a 2023 study estimated that by phasing out alcohol sponsorship, 123,000 additional years of healthy life could be gained in the 2018 population.

As part of its review of alcohol taxation, NZIER was asked to estimate the cost of alcohol harm in New Zealand.

Its analysis puts the cost at $9.1 billion in 2023, although it says precise measurement is difficult.

NZIER analysis shows that around half of this cost ($4.8 billion) is due to fetal alcohol syndrome (FASD).

The report, which also documents billions of dollars in lost productivity and road crashes, says alcohol (and other drugs) was a factor in 43% of fatal crashes between 2019 and 2021.

It also tallies the huge burden alcohol places on the criminal justice system, including police assessments showing that a third of violent crimes, half of sexual assaults and half of homicides are alcohol-related.

The report cited police data from 2018 showing an average of 103 crimes were committed every day in New Zealand, with the offenders all having consumed alcohol before committing the offences.

It presented data from the National Coroners Information System showing 26 per cent of suicide deaths were linked to “acute alcohol consumption”.

Drink driving crashes cost ACC $327 million each year.

The report also includes international evidence that “alcohol consumption is a risk factor for cancers of the oral cavity, pharynx, vocal cords, esophagus, colon, rectum, liver and female breast cancer.”

The New Zealand Drug Harm Rankings study found alcohol was the most harmful of all substance categories.

Mental Health Minister Matt Doocey was not available for an interview, but in a statement he said the government was committed to reducing alcohol harm.

Ministers have agreed to adjust alcohol duty in line with rises in the Consumer Price Index.

“This will return the tax to the purchasing power it had 15 years ago and will also mean that current alcohol harm reduction programmes will continue to be funded,” he said.

“I am aware that the recent review called for a significant increase in levy funding, however, I will not support this increase until a thorough assessment of all current and proposed alcohol harm programs currently funded by the levy has been carried out and the government has provided assurance that these programs are in line with government priorities.”