Volumetric vs. ad valorem

The Romans, bless them, developed quite a sophisticated wine industry. I
read recently (not in the original Latin though mind you) how a Roman wine
shop arranged tastings for late in the afternoons when sweet onshore breezes
would make wine more palatable and saleable.

Latin also underpins a current debate in the wine industry and in the
broader alcohol industry about the best form of Commonwealth taxation. Wine
is, along with other alcoholic beverages, currently taxed in an ad valorem
manner (value-based tax levied as a percentage of the wholesale price). The
yet to be released Henry tax review is likely to recommend a shift to taxing
alcohol on a volumetric basis -- that is, tax is levied on the amount of
alcohol in the product. These taxes are levied on wholesale prices and
unlike GST not directly visible to the buying public.

In the probable event that Henry does recommend this, I suspect the federal
government will take up this recommendation in part, but in ways designed to
appease the various strong alcohol lobby groups, where the interests of
beer, wine, and spirits producers are all diametrically opposed, and the
interests of cheaper/cask wines are also diametrically opposed to the
interests of makers of more expensive wines.

Do send me an e-mail Laurence@laurencewade.com if you would like a more
technical exposition, but for the sake of brevity in this blog post I
suspect that the net outcome will be:

* more expensive cask wine
* less expensive premium wine
* some continuing form of assistance to small wine producers
* continuing, fiddling changes every year so

Personally I would prefer to see much lower taxation rather than a shuffling
of the arrangements, but this is highly unlikely as governments like to
think they can use tax as a form of social policy -- in this case to reduce
alcohol related problems by increasing the relative and absolute cost of
cheaper forms of alcohol.