Hospitality businesses, producers and consumers of beer, wines and spirits have a new challenge with the announcement that the Consumer Price Index (CPI) is 6.7 percent.
The 6.7% rise in the CPI is used as a benchmark to increase the excise tax on beer, wines and spirits. The excise tax was $1.24 billion in June 2022 and is forecast to be $1.4 billion the following year[1].
“This will mean an extra $160 million in new taxes which are paid by producers and ultimately consumers. In this time of rapid inflation and a cost of living crisis, extra taxes are extremely hard to absorb,” says NZABC* Executive Director, Virginia Nicholls.
Excise is a duty imposed on locally produced and imported beer, wine and spirits products.
The annual excise tax adjustment is based on movements in the CPI (up until 31 March 2023) and starts on 1 July 2023.
“The continuing inflationary pressure, including rising ingredient and packaging costs, skill shortages, higher interest rates, and recent flooding and cyclones means that an increased excise tax will more than likely need to be passed onto consumers,” Mrs Nicholls said.
“It is not well known that the majority of beer, wine and spirits producers, hospitality providers and retailers are small and medium sized businesses”[2] [3], Mrs Nicholls said.
“The wine, beer, spirits and beverages industry provided much needed jobs, including all important entry level opportunities in every small town, city centre and suburb in between. This includes 1,865 businesses across small, medium and large businesses”[4], says Mrs Nicholls.
The more than 10,000 directly employed in the industry[5] do a whole variety of jobs from orchard workers, involvement in winemaking/brewing/distilling, manufacture and packaging, scientists, accountants, marketing, transport and logistics, salespeople and retail. Indirectly 20,913 kiwis are also employed.
The industry also sustains a productive and innovative domestic market and a growing export market.
“Only half (50%) of all kiwis realise that in addition to GST, there is an excise tax on beer, wine and spirits”[6], Mrs Nicholls said.
*NZ Alcohol Beverages Council.
Notes: [1] NZ Customs Service Rīpoata ā-tau Annual Report (June) 2022, p 167. Year ending June 2022 actual customs and excise duty on alcohol $1.24 billion and year ending June 2023 unaudited forecast of $1.4 billion, accessed 20 April 2023. https://www.customs.govt.nz/contentassets/01619abba6a748e98ce7282629484d0c/2022-annual-report-print.pdf
[2] NZ Winegrowers (NZW) categorises wineries by size, with small wineries classified as those who sell less than 200,000 litres of wine each year. In 2022 this accounts for 88% of wineries. NZW Annual Report 2022.
[3] According to Ratebeer as at 2021 there were 199 breweries in NZ (NZIER February 2022)
[4] NZ Institute of Economic Research (NZIER) report February 2022
[5] Ibid
[6] Conducted by Curia Market Research, December 2022, with 1250 respondents across NZ
