From Cleopatra to Wellington, leaders have always taxed beer. But Australia’s system has made beer extra pricey
- Written by: Anthea Gerrard, Assistant Professor of Law, Bond University
Beer has existed for thousands of years. It was the drink of choice in ancient Egypt, in northern Europe in the Middle Ages and, of course, remains popular around the world today.
And, since it was so widely consumed, it was the perfect target for taxation by governments throughout the centuries. There are even records of governments taxing beer 5,500 years ago in Mesopotamia.
Some levels of taxation have been tolerated over the centuries because of beer’s known adverse impacts on health and behaviour.
But the truth is leaders taxing beer (and, therefore, beer-drinkers) have always been able to generate large and secure revenue streams.
Raising beer taxes wins wars
The Egyptian queen Cleopatra is widely believed to have used beer taxes to fund her wars with Rome (she claimed the taxes were to combat “drunkenness”).
Dutch leaders in 16th century Holland used beer taxes to fund a well-trained and permanent army, enabling them to defeat the enormous Spanish Empire during a conflict known as the Dutch Revolt (which lasted from 1566 to 1648).
While the Spanish relied on silver and gold from their colonies, this was no match for the beer taxes raised in Holland.
Leaders in the UK also relied on beer taxes to fund the wars that helped establish the British Empire and secure British power.
In the preamble to the first British law imposing taxes on beer in 1643, reference is made to the
speedy raising and levying of money […] for the maintenance of the forces raised for the defence of the king and parliament.
In all these cases, beer taxes specifically helped leaders and politicians fund and win wars.
Lowering beer taxes wins elections
If politicians raise beer taxes to finance war projects, the direct opposite can occur when the same politicians go to the polls.
In 1830, Britain’s Prime Minister Lord Wellington faced an election and was naturally concerned about winning.
Lord Wellington cut taxes on beer, and got re-elected.
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In response to a growing campaign entitled “Beer is best for health, best for Britian” and the desire to win the election, parliament took the popular measure of abolishing taxes on beer to “reform the beer industry and free up the trade in beer”.
This was despite the measure costing the economy a whopping £3 million.
But the plan worked and Wellington won the election – only to lose power a few months later following the controversial emancipation of the Catholics (a process of lifting various restrictions on Catholics).
Beer taxes and the cost of living
In the lead up to Australia’s next federal election, some members of the Coalition have proposed reducing excise taxes on beer.
Lowering taxes, leading to reduced prices, would assist with the current cost of living crisis, they argue. Beer drinkers and brewers would no doubt approve, but how do beer taxes in Australia currently work?
The right to impose taxes on goods, such as beer, is the exclusive domain of the federal government. In other words, states can’t tax beer (or any goods).
Schedule 1 of Commonwealth Excise Tariff Act 1921 contains both a definition of beer and the various rates of tax on beer, depending on alcohol content and the way it is sold. The higher the alcohol content, the higher the tax rate.
Wine is not included. It is taxed separately and at a lower rate than beer.
The way beer is taxed in Australia is different to the way wine is taxed.
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Beer tax rates are also adjusted in June and December each year based on the CPI from the April and October quarters, respectively.
Wine taxes, on the other hand, are set by legislation and only updated from time to time.
The impact of this difference can be seen when comparing the increases in the price of beer in the last decade compared with the price of wine. Both have been subject to the same economic conditions, yet the price of beer has doubled, while the price of wine has increased by less than 20%.
These biannual increases in beer tax rates have resulted in huge increases in the price of beer.
In 2023 alone, the price of beer excises increased by 11%.
As the cost of living crisis takes its toll, the public (and brewers) are understandably aggrieved.
A change to beer tax in Australia?
Like their British forebears, some members of the Coalition are proposing a beer tax cut.
They are considering using a substitute rate (not CPI) to determine the taxes on beer, which is allowed under the law.
(Other senior Coalition members, however, have distanced themselves from the idea of changing the way beer is taxed).
Will any of this mean cheaper beer at the pub? That depends on whether pre-election ideas turn into actual policy – and whether brewers and pub owners pass on savings to customers.
Authors: Anthea Gerrard, Assistant Professor of Law, Bond University
