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Public faces bill for drink duty mix-up

Andy Gilbert

TAXPAYERS may be forced to foot the bill for losses in expected alcohol duty totalling $500 million since a new system was introduced two years ago with the promise it would be 'revenue neutral'.

The Government has claimed teething problems calculating the new tax may be partly to blame, despite it being trumpeted at the time as a simpler system to its predecessor.

It is unlikely officials will abandon the system, although both the current and former financial secretaries promised a review after lobbying from the beverage industry.

Wednesday's Budget is also likely to keep the current duty rates for spirits, wines and beers, the industry feels, but may make up for the lost revenue in other areas.

Customs and Excise figures show $954.6 million was collected in duty in the financial year to April 1995, the first year under the new system.

This represents a 25.5 per cent drop in revenue from the previous financial year, the last under the old tax collection system, when duty collected was $1.28 billion.

Figures for the first 10 months of this financial year showed just a 4.2 per cent increase over the same period last year.

Projected to the end of the financial year, using the same trends as last year, the Government can expect to collect $963 million.

Taking into account the past two years' inflation, this is a shortfall of nearly $500 million on what would have been collected under the old scheme.

Because of the claim the scheme was revenue neutral, the Government will have to make up the shortfall to balance its books, and if it leaves the system unchanged, extra taxes must be levied elsewhere.

A government finance spokesman said the decrease was 'phenomenal'.

'When we introduced a new system in the 1984 Budget we also noticed a drop in alcohol tax revenue,' he said. 'It may take time for people to get used to the new system.' The system is solely based on a percentage of a drink's value - ad valorem - whereas the old system included a flat rate. Spirits are levied at 100 per cent, wines and sherries at 90 per cent and 30 per cent on beer.

Brewers Carlsberg said the problems were due to an inability to calculate duty because of differing interpretations of beer's value.

'We have not yet received final confirmation of duty charges incurred since the new system was introduced,' a spokesman said.

'We expect to pay less duty under the new system but the actual rates are not yet confirmed.'

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