Tax office has raised excise by 4%, leaving Australians with the world's fourth-highest beer tax behind Norway, Japan and Finland Pour one out for Australia's beer drinkers as the price of a pint at the pub surges up to $15 (8.60/US$10.50) following the largest tax hike in more than three decades. The Australian Tax Office announced the excise on beer would be lifted by 4% on Monday under its CPI indexation review. The Brewers Association of Australia said it was the biggest increase in more than 30 years to hit a market that was already taxed more than "almost any other nation". "We have seen almost 20 increases in Australia's beer tax over the past decade alone," CEO John Preston said. "Sadly, we're now seeing the impact as pub patrons will soon be faced with the prospect of regularly paying around $15 for a pint at their local. "For a small pub, club or other venue the latest tax hike will mean an increase of more than $2,700 a year in their tax bill - at a time when they are still struggling to deal with the ongoing impacts of the pandemic." Australia's excise on beer is adjusted twice a year according to inflation, which is growing at its fastest pace in more than two decades with a peak not expected until the end of the year. Wine operates under a separate taxation system. For a full-strength beer served from a keg in a pub, the excise will increase by $1.51 to $39.27 for every litre of pure alcohol. For packaged beer, the excise will increase by $2.14 to $55.73 per litre of alcohol. Publicans and brewers are also pointing to the increased price of labour, energy, ingredients and other inputs for increasingly expensive pots, pints and schooners.

2 A report by economist and University of Adelaide professor Kym Anderson AC, commissioned by the Brewers Association in 2020, found Australians paid the fourth- highest beer tax in the world compared with advanced OECD and EU countries. Only Norway, Japan and Finland paid more. The next highest-taxing countries were the United Kingdom and Ireland, but their rates were still about 30% lower than Australia's between 2018 and 2020. Task: One possible justification for a tax on beer is that alcohol consumption causes a negative externality. Explain what this means, why it might be the case, and how a tax might improve economic efficiency under these circumstances. Ensure that you use diagrams where relevant to support your answer, and make sure to use key terminology and course concepts where appropriate. Note: The reality of the case is not the imposition of a new tax, but an increase in tax - meaning that a tax is already in place. However as this is an introductory level course, for simplicity you can depict this on your diagram as a change between no tax and adding a new tax.