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Monday, 16 March 2009
Page: 1623


Senator FIFIELD (8:36 PM) —It is always a great pleasure to follow the ever-thoughtful Senator Humphries, one of the great legislators of this chamber. The tax we are debating is yet another example of Labor’s nanny-state approach to governing. The government contends that this legislation, the Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 and the Excise Tariff Amendment (2009 Measures No. 1) Bill 2009, is intended to reduce binge drinking. I do not accept that contention for one second.

The RTD tax is nothing but a naked tax grab. Even if we give the government the benefit of the doubt, even if we accept their claims at face value, the truth is you cannot solve social ills through a tax. You cannot cure the ills of society through a tax. You cannot change behaviour and you cannot eliminate binge drinking through a blunt tax. If it were possible to do this with binge drinking then it would also be true for obesity, smoking and tooth decay. Through applying the right tax at the effective and appropriate level to the offending cigarettes, foods and beverages, surely we could stop smoking, tooth decay and obesity, as well as binge drinking. But, as every senator in this chamber knows, that is absolute nonsense. The government, or at least its senior members, know this as well as we on this side of the chamber do. Some on the other side of this chamber with a social-engineering heart may have a genuine but wrongly held belief that you can cure social ills through a tax. But the architects of this tax in the other place—Mr Rudd, Mr Swan and Ms Macklin—know better. They are smarter than that. They know that this tax is nothing but a tax grab.

But, as is so often the case, it is much more important for Labor to be seen to be doing something than to actually do something practical. I must say that Labor’s approach to taxation of RTDs reminds me very much of the Victorian government’s approach to binge drinking and alcohol related crime in the city of Melbourne. The state Labor government’s solution to that issue was not to put more police on the beat, was not to have an education campaign and was not to put more public transport on; no, the Victorian state Labor government’s solution was to institute a 2 am lock-in. If you were at a venue—a bar or a nightclub—once 2 am hit you had to stay in. If you left, you could not come back in and you could not go into another venue. You had to stay in. That was the brilliant solution: the 2 am lock-in. That was the nanny state’s solution. Their objective was not to address the problem, which was a law and order issue; their approach was to punish small business and young people, the majority of whom do the right thing. That 2 am lock-in trial went for a few months, but—surprise, surprise—at the end of it the government decided that it had not worked. Such is the case with this particular legislation as well. That sort of approach never works.

When the Rudd government introduced this particular tax grab on premixed alcohol in its first budget, it claimed, as I have said, that it was a measure to address concerns about drinking amongst young people. It claimed that binge drinking had reached epidemic proportions amongst Australians aged 14 to 19 and that only a tax increase on these popular drinks could tackle the looming health problem. I have Mr Swan and Ms Roxon’s media release of 13 May 2008 here—it was quite some time ago, 13 May 2008—which cries:

Binge-drinking is a community-wide problem demanding a community-wide response, and this decision by the Rudd Government is an important part of that response.

Well, was it? Let us see. I must say that the dissenting report of Senator Cormann, Senator Humphries and Senator Birmingham sheds a lot of useful light and provides a lot of good information on this subject and whether that great media release of 13 May last year did fulfil its promise.

The opposition and many in the industry were wary that this tax was not a health measure but, as I said, simply a policy designed to raise revenue. The claim was that a 70 per cent increase in excise on RTDs—a narrow category of alcohol beverage—would help reduce rates of binge drinking amongst Australian youth. That decision, taken nearly a year ago, should be very easy for the government to defend if it has worked. They should be able to point to tangible benefits from the introduction of the tax, such as declining rates of binge drinking and reduced hospital admissions amongst the target group of young drinkers, especially females. But the government have failed to do so. They have been unable to provide any solid evidence to prove that this tax is achieving its objectives. We do not have to go any further than the opposition senators’ minority report to discover that:

The government by its own admission did not even try to get the evidence to demonstrate whether or not the measure had reduced at risk levels of alcohol consumption or alcohol abuse related harm.

In answers extracted from Treasury as a result of an Order of the Senate the Government admitted that beyond the 2007 National Drug Strategy Household Survey (before the measure was introduced) it had:

“not collected any additional national consumption data on the reduction of risky or high risk and/or at risk behaviour since the introduction of the RTD excise increase in April 2008”

They have not collected any additional data. I thought that government senators might actually try to hide this fact in their majority report, but I was actually surprised by their honesty. At 1.195, they write ‘notwithstanding its partial and inconclusive nature’, referring to the partial and inconclusive nature of the evidence.


Senator Cormann —That is as bad as it gets from government senators!


Senator FIFIELD —Indeed! And they go on to say at 1.196:

… it was not possible to definitively conclude that this reduction in consumption had resulted in a reduction in levels of risky and high-risk consumption of RTDs by young women, leading to improved health outcomes.

Well, what is the point? If you do not actually have the evidence to prove that the purpose of the tax is being met, what is the point of the tax? Government senators themselves recognise the complete and utter lack of evidence at recommendation 1:

The Committee recommends that the government develop strategies to facilitate the collection and coordination of national public health data to better inform policy approaches to the reduction of alcohol-related harms.

In other words, there is no evidence. That is why the No. 1 recommendation of the government’s own majority report is: ‘We had better set about the task of finding evidence.’ That is quite extraordinary and quite a damning admission.

Further to that, a report by Access Economics found that there has been no meaningful decline in the rates of hospital admissions of people aged from 12 to 24 for alcohol related illnesses. When you look outside the government’s own resources and evidence and you look to independent evidence, you cannot find any there, either. You would think that, if binge drinking were being reduced, one area in which you would see results would be hospital admissions. After all, the government TV campaign focused on teenagers vomiting, suffering from alcohol poisoning, getting in furious and serious fist fights in nightclubs and leaving with blood streaked faces, and falling through glass coffee tables and ending up with multiple severe cuts and wounds. Despite the tax and despite this advertising campaign, those admissions have not budged one bit.

I concede that the sale of RTDs has fallen, but we have no indication of where that fall occurred. Was it among binge drinkers? We do not know. Was it among vulnerable youth? We do not know. Was it among those who are sensible and moderate drinkers? We do not know. From which category has the new legion of full-strength spirit drinkers emerged? If it is from young, vulnerable drinkers, the government policy may have done more harm than good. Bizarrely, the government have made no efforts to measure this. They have not gone to any lengths to analyse the effects of the new tax. They were simply unable to answer senators’ questions on these topics during recent estimates. How can they be confident that this tax is the right approach?

Most health experts advocate an approach to taxing alcohol that directly contradicts the government’s position. That is even though many of those experts appeared before the Senate inquiry to support the government’s measure. Volumetric taxation, where lower concentration of alcohol in a drink attracts a lower excise, would use a graduated level of taxation to discourage consuming products with higher levels of alcohol by volume. The government’s decision to tax premixed drinks, which have similar levels of alcohol concentration to beer, at the same rate as raw spirits creates the bizarre incentive to consume products with higher levels of alcohol by volume. The reality is that the government did not introduce this tax as a health measure. If the health and welfare of young Australians were in the forefront of its mind then it would have introduced volumetric taxation measures. That would have been one approach.

The reality is that the government were looking to raise revenue, pure and simple. This tax was supposed to raise $3.1 billion in extra revenue for the government. It was one of the three major tax hikes in the Rudd government’s first budget. The Rudd government wanted to prove something in that budget to the Australian people. They knew that the Australian people were rightly sceptical about their ability to manage the nation’s finances and keep Australia out of debt—how funny that is now—and they had a plan to send a strong message that they were different from previous Labor governments. They are not so different after all.

They said that they were going to post the biggest budget surplus in recent history, but they did not want to do so with politically painful spending cuts. Because Kevin Rudd ran as an economic conservative in the federal election, they could not get away with personal income tax hikes or company tax hikes. So what did they do? They went for the politically easy tax grab. First they went for luxury cars. No-one was going to put up much of a fight to defend cheaper BMWs or Mercedes imported from overseas. Then they went for the North West Shelf gas project. No-one was going to die in a ditch to defend a big oil company. Lastly, they went for the alcohol industry. We were told that they were simply trying to look after the health of young Australians who were risking their futures by binge drinking on sugar flavoured pre-mixed drinks. They thought that they would tug at the heartstrings so that people would buy it and they would get this tax grab through. The government was simply eyeing the $3.1 billion in tax revenue that the grab could deliver them.

Unfortunately, Labor’s tax grab has had serious consequences for young Australians. It follows logically that raising taxes by type of alcohol will not stop people drinking all types of alcohol. It will just lead them to switch from the newly expensive drinks to the other cheaper alternatives. It is obvious when you think about it. If product A becomes more expensive you will transition to product B, which is cheaper, which has the same effect and which, if you mix it in the right combination, can have the same flavour. It is obvious; it is clear. It is what is called the substitution effect. Anyone with a rudimentary understanding of economics—or even a rudimentary understanding of human nature—would be able to tell you that that was what was going to happen. This tax has done just that: it has led to a major and significant substitution effect.

How do we know this? Well, we can hazard a guess after looking at the figures. Between 1 May 2008 and 31 January 2009, the sale of full-strength spirits increased by 17 per cent. I wonder why that was? As I said, this would not come as a surprise to anyone who knows the first thing about economics. When the price or availability of their desired product changes, consumers substitute the next best thing. For those who drink RTDs—typically a liquor such as vodka mixed with a soft drink like lemonade or raspberry flavoured soda—the choice is easy. They get the now comparatively more affordable full-strength spirits and some soft drink and mix it themselves. It is the obvious thing to do.

But there are serious consequences to this decision. Inexperienced drinkers, unable to easily measure their drinks, may well be pouring these drinks themselves and making concoctions that are far too strong. As a result, they may end up consuming much more alcohol than they intended. This is particularly a risk with the government’s supposed target group of 14- to 19-year-olds. By contrast, premixed alcohol is clearly labelled; you know what you are getting. You can see the alcohol on the side of the bottle or can and you can even measure pretty easily the number of standard drinks you are consuming. It is much easier to monitor the number of drinks that you have had in that situation.

If you are mixing your own, perhaps for the first time, you will have little idea of what you have actually drunk. The massive increase in sales of hip flasks—by 20 per cent according to the alcohol industry—further underscores this point. We do not need to think too hard as to what may be going into those hip flasks or why their sales have increased so dramatically. There is no doubt that, this weekend, teenagers across Australia will be swigging full-strength spirits or spicing up their Diet Cokes from flasks in their back pockets. This is something that I am sure is happening more often than before this tax was introduced. No doubt parents will have to pick up their intoxicated teenage sons and daughters from house parties this weekend. And if their children got drunk because they did not know how to mix their own drinks then many may be able to thank the Rudd government’s RTD tax for the increase in that situation.

The government has totally mishandled the process of this legislative change, which was announced proudly on budget night. It required ratification by both houses by 19 March this year. With just three sitting days to go to validate the decision, the government still has not secured passage of its bill. It leaves the Senate with a short period of time to evaluate the merits of this policy. The government of course has warned that if this bill does not pass the Senate millions of dollars in taxation revenue will have to be handed back to the alcohol industry. They mention this because they are attempting to use this as a threat to bully the Senate into supporting their bill.


Senator Cormann —That is another thing that is untrue, of course.


Senator FIFIELD —Indeed, it is untrue. But this need not be a problem; it is easily fixed. If the government had sought to consult with this chamber—which they seldom do—before introducing the legislation, perhaps even the potential of that situation could have been avoided. The opposition has recommended that the revenue collected so far from the tax should be focused on the problem the policy was actually designed to address: binge drinking. There is the capacity for the parliament to validate the revenue already collected and there is also the capacity for the parliament to ensure that the money collected—the money which could be validated—is not returned to the industry in the event that this bill is defeated. That is easily done by legislation and most in the industry do not want the money returned. That money can be quarantined and it can be put to the purpose that this legislation was intended to fix—that is, we could put the money towards advertising campaigns and other worthwhile purposes.

The government must take responsibility for this situation. The policy was not a measure designed to address public health concerns. It was simply a tax grab. It risks making binge drinking amongst teenagers more dangerous than before. The legislation is a con and a sham—it always was—and this legislation should be defeated.