|Public to Government: 'Please explain', Canberra Times, 25 March 2009|
|by Katherine Gregory, Project Leader, Per Capita|
|If ever there was a time to assess the mixed motives underlying taxation in Australia, then this is it.|
The Senate’s rejection of the alcopops tax reflects on the government’s failure to provide a coherent approach to the taxation of one of society’s most popular pleasures.
If the government wanted to be taken seriously in the Senate, then it needed to take the public more seriously and explain where the alcopops revenue will go. At least people would then understand what they’re investing in each time they pay the new tax.
It’s a real shame the bill wasn’t passed. Not only because the Distilled Spirits Industry Council of Australia is frothing at the mouth with thought of increased sales.
But also because disincentive taxes do work, but they are just compromised when the government refuses to implement the necessary supporting policies.
Otherwise known as behavioural taxes, they have a two-pronged disincentive effect.
Firstly they can deter the public from engaging in harmful activities by increasing the prices of goods like tobacco, petrol and carbon. Secondly these taxes allow extra revenue to be invested in complementary deterrent schemes.
The problem was the government only offered one side of this two-pronged approach.
Although this wasn’t enough, it was certainly better than nothing.
Data released by the Australian Drug Foundation shows the number of alcopops sold in the 10 months to March 2009 dropped by the equivalent of 310 million standard drinks. Similarly, the National Drug Research Institute recorded a 26 per cent drop in alcopop sales in the three months to June 2008, compared to the same period in 2007.
The Opposition and the alcohol industry said the tax did little to reduce binge drinking in teenagers.
The truth is it’s far too early to decide that argument. Changing public behaviour takes time – much longer than 12 months.
So long-term thinking is the key.
The government had to weigh up the health and social costs of binge drinking, estimated at $15.3bn per year, against the benefits of investing in long-term preventative measures.
That’s why Nicola Roxon’s compromise of $10 million, allocated to alcohol help lines, treatments and prevention schemes, was like hitting an elephant with a pop-gun.
If the government didn’t want to spend all the revenue on alcohol prevention measures, then it needed to channel that money into other long-term public investments.
There are a myriad of possibilities: public goods such as health, housing and education, extending income redistribution, or subsidising the abolition of unproductive imposts such as payroll tax and negative gearing.
The debate also raises a wider issue. For an increasing discerning public, accountability and transparency of taxation revenue is becoming a greater focus. The Henry Review is also alive to this trend. So motives and justifications for taxes need to be displayed first-hand.
Senator Fielding erred in blocking the bill – not only was he denying a policy that, while flawed, had strong potential, but he has also shot himself in the foot. What sort of party that puts family first, denies a policy that is aimed at curbing teenagers buying cheap and easy alcohol?
But the government should have listened to the demands of cross-benchers and health industry experts, not just because it was smart Senate politics, but also because they had valid points.
Hopefully the government has learnt its lesson and will next time make smarter decisions about how it taxes alcohol and what it does with the money.
For example, it could tax alcohol according to its intensity (volumetric taxation). Supported by both the Australian Medical Association and the Distilled Spirits Industry Council, this policy avoids discriminating how the alcohol is manufactured and takes a logical approach to binge drinking.
A related approach is to use the revenue raised from alcopops taxes to reduce the costs of low-strength drinks – and so congratulating those ‘sensible drinkers’.
Ultimately, the alcopops tax and associated revenue, is all about helping people make better choices.
If the government wants to get this bill passed next time, then it must give the tax proper validation – so that it becomes something the public can believe and invest in.