Why beer will soon cost more

Half the price of a 12-pack of beer will soon be made up of tax after the Government announced the second largest ‘‘beer tax’’ increase in 30 years.

Alcohol excise rates, which apply to domestically produced alcohol as well as duty on imported beer, wine and spirits, will increase by 6.6% on July 1.

The latest hike follows a record 6.9% increase last year and is expected to cost consumers an extra $86 million a year, including $28.9m for beer drinkers alone.

Brewers Association of New Zealand executive director Dylan Firth said the increase could not come at a worse time. ‘‘When you next buy a 12-pack of beer, 50% of the price will be made up of tax through excise and GST.

‘‘Combined with the many other increasing costs brewers and beer sellers in the hospitality sector are facing, the price of a pint is fast becoming out of reach.’’ With borders reopening and tourism rebuilding, New Zealand risked being seen as ‘‘the land of the unaffordable pint’’.

Firth said the system, which linked annual excise increases to the Consumer Price Index, was flawed, especially at times of high inflation. ‘‘We have always highlighted to the Government that they have the discretion to not raise excise by CPI. This is built into the legislation.’’

When inflation averaged 2%-3%, businesses could absorb the cost or build it into pricing.

‘‘But the large increases we have seen in the past two years, totalling more than 13%, mean the cost jump for businesses prevents further investment, innovation and growth.’’

Brewers Guild executive director Melanie Kees said other countries had identified the positive effect tax relief could have on small businesses. ‘‘The UK Government froze excise tax increases several years ago. Now, with this coming to an end, they have announced almost 10% relief for keg beer sold through hospitality venues to offset inflation.’’

Australia also had a differential keg excise rate which was lower than the rate for packaged beer, and supported smaller breweries with an excise exemption on the first 500,000 litres of beer produced.