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Submission on Law Commission’s Review of Alcohol

October 30, 2009

I’m a bit lazy to do a long submission on this and there’s a lot of questions – many of which I don’t have a specific answer for – so I’m going to focus my submission on some key concerns and points. Typical – doing this an hour before it’s due!

I am craft beer enthusiast and home brewer and believe I represent a significant and growing number of beer drinkers around the country who have a healthy, if passionate relationship with this beverage. Like most people, I agree that there is an issue in this country with a minority of problematic drinkers. However, I am concerned that the Law Commission’s recommended solutions to this problem will unfairly penalise sensible drinkers while having little effect on problem drinkers.

My main area of concern is with any proposed increases or changes to excise tax on alcohol. Firstly, I take issue with suggestions based on the recent BERL report on the costs of alcohol that current excise duty collected is far less that the external costs imposed on society by drinkers and should therefore rise. I am convinced by arguments from Eric Crampton and Matt Burgess that the BERL report – due to only looking at costs – has no policy relevance in the absence of a full cost-benefit analysis being undertaken. Crampton and Burgess also raise a number of concerns with the methodology used by BERL which inflate costs – their counter analysis concludes that the current excise tax collected is approximately equal to the external costs of drinking.

Even if current excise collected were less than external costs, I take issue with increased costs being imposed on sensible drinkers rather than taxpayers as a whole. Such measures always overcharge sensible drinkers and under charge problematic drinkers. There are many other activities within society where external costs are met by wider society rather than only those engaging in the activity.

I also oppose other reasons for increasing excise tax such as reducing consumer demand as these also unfairly hit sensible drinkers while heavy drinkers are quite likely to accept the one-off increase and rearrange their finances to continue drinking at the same level, while those in the middle reduce their drinking and the subsequent benefits / pleasure that come with it.If reducing consumption is simply seen as a net positive, then why not increase tax until no one drinks at all? It is tempting to argue that I am already paying higher prices for craft beer which is certainly not the problem in New Zealand and don’t see why I should have to pay increased excise tax on this. This is certainly true – however, I don’t see why sensible drinkers who prefer or can only afford to drink cheaper brands of beer should have to pay more tax either.

Other suggestions in the tax area such as reducing tax on low alcohol beers and increasing it on higher alcohol ones also raise concern with me. While overall beer consumption in NZ in recent years has remained relatively flat, there has been growth in consumption of beers between 4% and 5% abv.  I do not see that as an issue for concern – particularly in the area of beer greater than 5% abv where consumption has actually declined. The trend simply shows that people are preferring to consume more sophisticated craft and international style beers (typically 5%) rather than the traditional easy drinking mainstream NZ beers (typically 4%). Higher abv beers tend to be more expensive, more challenging to the palate and therefore more likely to be consumed in moderation than mainstream NZ beers. I am concerned that any increased differentiation in excise tax bands is likely to make 4% swilling beer cheaper while penalising craft beer and possibly making unique high abv beers such as those from Belgium uneconomic to import (such beers are expensive, very rich on the palate and highly unlikely to be ‘skulled’ by drunkards) – this seems the direct opposite of what is trying to be achieved – is higher abv beer really the problem in this country? Such policy is likely to mean that tax dictates beer styles in NZ rather than the consumer and ignores the fact that quality beer typically requires a good proportion of malt for taste and therefore has a certain percentage of alcohol. People are not going to drink 3% beer even if it is dirt cheap.

Other options I oppose are those that would benefit one type of liquor outlet over others – such as restricting availability in supermarkets. As a consumer, I enjoy drinking both at on licences and at home – I believe I should have the power to choose what option suits me at any particular time. Both types of consumption have positives and negatives and should not be given bias through law. It is easy to see why publicans and liquor stores support moves to restrict supermarket sales –  such sales have however, given great benefits to beer and wine consumers in recent years through great selection and competitive pricing.

Not very polished but times almost up – better submit!

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