Brewers Association asks Government to halve excise tax on kegged beer

The Brewers Association has written to Finance Minister Grant Robertson.
The Brewers Association has written to Finance Minister Grant Robertson. Photo credit: Getty

By Denise Garland for RNZ

The Brewers Association of New Zealand has asked the Government to halve the rate of excise tax paid on kegged beer as a way to support the struggling hospitality sector.

The association - which represents the country's two largest breweries, DB and Lion - has written to Finance Minister Grant Robertson asking for the tax reduction.

It would mean businesses selling beer on tap would save $38 per 50-litre keg of 5 percent beer.

Brewers Association executive director Dylan Firth said with the constant yo-yo-ing between COVID-19 alert levels over the past 12 months, the country's bars and restaurants deserved better, more specific support.

"We've seen internationally that there's some really targeted relief for hospitality, whereas here it's more broad business relief and we think the time is right to actually look at these businesses and try and help them out because they're the ones still hurting the most."

Firth said the excise tax saving would provide valuable additional income for bars and restaurants when trading with the amount saved adding up over time.

"If any business is looking at their outgoings, obviously you're buying food to sell through your kitchen, you're buying beer to sell through your bar, and any inputs that can be reduced in cost is saving to a business," he said.  "If you can continue to charge the same price you're probably [going to] be doing a little bit better out of it, but if you want to pass a little bit of that on to the consumer, then the consumer also wins as well," Firth said.

He said the proposed tax reduction would provide valuable extra income to hospitality businesses, without benefitting supermarkets, which have been able to operate openly during the country's lockdowns.

Epic Hospitality group has four central city bars in Wellington. Owner Greig Wilson said this was the exact sort of targeted support that the hospitality industry had been crying out for.

"This would have a significant impact," Wilson said.

"As an industry, we have been hanging out for this targeted support for our industry and it just hasn't happened. I think this is a brilliant scheme that would directly affect [us] and give our businesses a much-needed boost of cash."

He said a busy bar would go through about 50 to 60 kegs a week, so a saving of around $38 on an average 50-litre keg would make a huge difference to the bottom line.

"Level 2 is terrible for hospitality businesses across the country because our capacity is reduced to 100 people and there's the three S's [seated, separated and single server] - people go to a bar but pretend they're at a restaurant and sit down and so the trade plummets.

"This is a really smart way to be able to target cash exactly to the businesses that have been most-affected through these lockdowns."

Wilson said he did not think it was likely that breweries would not pass on the tax savings if the proposal was to be accepted.

"I think they'd be named and shamed [if they did]. As an industry, we work together pretty tightly, so I don't think that would be a huge risk."

Firth admitted the tax reduction would also benefit those making and selling the beer to bars and restaurants.

"Obviously brewers around the country will benefit from this and I think there's no avoiding the fact that they have also hurt in the last few years. We've seen only a slight reduction in beer consumed over 2020, but it is really where [the beer] is sold - so the value is different when it is sold through hospitality versus supermarkets and off-licenses."

Breweries tend to make higher margins on the goods they sell to bars and restaurants, compared to supermarkets.