The Brewers Association of New Zealand has requested government immediately reduce the rate of excise tax paid on kegs by 50% in a measure to support a severely hit hospitality sector.

“We believe there is need for additional government support that can be delivered in an extremely targeted way via an immediate 50% reduction on excise tax for keg beer,” says Dylan Firth, Executive Director of the Brewers Association of New Zealand.

Dylan Firth

“This would provide additional valuable income for outlets when they are trading.

“We applaud the UK government for their wide-ranging initiatives in the recently announced budget, where for a second year have announced a freeze on all alcohol excise until 2021 and a significantly reduced VAT rate specifically for hospitality businesses of 5%.

“We feel the impact of lockdowns and level changes here in New Zealand – specifically in the Auckland region – necessitate relief that would benefit a large part of the hospitality sector,” says Firth.

“Government received $411 million in excise tax from the brewing sector in 2020 which will likely go up again in 2021 due to annual alcohol excise increases. What we are asking would equate to about a 6% reduction of this in real terms.”

Firth says the hospitality industry has suffered badly during the past 18 months and needs specific support.

“Industry figures believe the sector was down at least 20-25% on average last year.

“The 2020 lockdowns and level changes to date have compounded this, with hospitality one of the industries deeply affected.

“Level changes limit or restrict customers severely and provide significant reduction in consumer confidence and expenditure in the medium term.

“For the majority of hospitality businesses, they can only sell alcoholic beverages on site, meaning they are unable to trade at all under Level 3.”

Firth says contrary to some reports that have focused on specific buying patterns immediately pre and during lockdowns, sales of beer did not increase in 2020 and in fact declined by 1.7% according to Statistics NZ data just released.

“Furthermore, while this reduction may seem small, it does not reflect the change in consumers habits from purchasing their beer in bars and restaurants and moving to off-premise or supermarkets, this transition to other purchasing locations has again been hugely costly to the hospitality sector,” he says.

“A keg specific excise reduction such as this is targeted only to hospitality operators, as kegs are only used by on-premise bars and restaurants.

“This also provides targeted support for small breweries who generally have higher ratios of product sold through kegs, as well as often their own taprooms.

“What we are looking to target would be consistent with other peer markets such as Australia, which has a long-standing reduced excise rates for keg beer.”

Firth says the COVID Support Payments and wage subsidy remain critical to the basic survival or many outlets, as they help cover operating expenses, but they will not suffice to keep many operators from going out of business, with consequential impact on employment, GST and income tax revenue.

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