Marin Institute

Alcopops manufacturer Diageo is facing strong opposition in Australia after skirting last April’s tax hike, working around current definitions of the law by reformulating their products.

Australian Health Minister Nicola Roxon says their government takes a “very dim view” at Diageo’s attempt to avoid the tax and “won’t let them get away with it.”

Producers responded to the 70 percent tax increase by modifying the manufacturing process, making pre-mixed drinks that are beer-based – the same game being played here in the U.S. This distinction is crucial for products like the colorless Smirnoff Platinum, which looks and tastes like a citrus vodka mixer, but is no longer categorized as spirits because it is brewed.

Roxon calls the modifications of alcopops products desperate attempts by industry, whose irresponsible advertising practices include using social networking sites to reach their target market of underage drinkers.

Spokesman Stephen Riden of the Distilled Spirits Industry Council of Australia (DSICA) calls it absurd to tax a product on the way it is manufactured, rather than by the alcoholic percentage level. This rationale ignores the purpose of the tax hike, which aims to curb binge drinking among youth, a population proven sensitive to price increases.

In an attempt to invalidate the tax policy, DSICA conducted its own survey, asking adults over the course of 2 days if they felt tax increases were effective in combating underage drinking. Not surprising, Riden concluded that the tax is failing.

Health Minister Roxon, who feels strongly that taxation measures are working has stated, "If there are options that need definitions to change, need us to take further legislative action, we will consider each and every one of those options."

The tax has not yet passed the Senate, but Roxon is determined not to let manufactures get away with dodging their responsibility. Perhaps U.S. regulators will follow their lead.