Opening statement to Commonwealth Senate Select Committee on Red Tape inquiry into the effect of red tape on the sale, supply and taxation of alcohol

With Darcy Allen

The Institute of Public Affairs welcome the opportunity to appear before this inquiry. Red tape is one of the most pressing challenges facing Australia. A recent IPA estimate calculated that red tape costs us $176 billion in forgone economic output every single year. That $176 billion is more than we pay in income tax and it is the equivalent of Australia’s largest industry. Cutting red tape is one of the keys to ensuring our future prosperity; therefore the present inquiry into red tape is welcome. Liquor licensing in particular is a significant burden on Australian businesses. This is a red-tape problem not only for late-night venues but for thousands of cafes and restaurants across this country.

If we look to South Australia as an example, there are more liquor licences for restaurants than under any other category. Business owners spend millions of dollars in compliance costs each year and these pieces of red tape generate economic distortions that hold our country back. The central contribution of our submission is a broad, cross-jurisdictional analysis of liquor-licensing regulations. We have two main findings. First, that across various states there are multiple different types of liquor licences, sometimes over 10; and, second, many jurisdictions exhibit complex and tiered fee structures ranging into the tens of thousands of dollars. Based on these findings, we make three recommendations. First, Australian states and territories should seek to streamline the number of licence types to the minimum viable level. A wide range of different licence types acts to increase business uncertainty and thereby compliance costs. We see no logical reason that some states would require 13 different licences, for instance.

Our second recommendation stems from the fact that many jurisdictions are characterised by excessive and complex liquor licence fee structures. The fees for application and renewal of liquor licences are progressively tiered from the cheapest to the most expensive licence, based on factors such as venue capacity and patron numbers. Some states even apply complex multipliers based on these factors. We recommend the structure of the licence fee system across Australia be flattened. By ‘flattened’, we mean: to reduce the difference between the lowest and the highest licence fee. There is no clear reason why the current fee structure is tiered, apart from the chance to raise more government revenue.

Our final recommendations concern licensing more broadly. We recommend that all Australian jurisdictions shift their regulatory resources away from licensing, first towards enforcing the basic principles of the regulation of liquor on operating businesses. That is to say, we should proceed by enforcing defections from agreed, simple laws, rather than increasing the red tape and compliance burden, which collectively impacts all businesses. Indeed, this broad principle, if applied to many Australian industries, would help ameliorate Australia’s growing red tape problem. Thank you for your time. We welcome any questions you may have.