Budget 2016 drinkers and smokers likely hit by price hikes

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DRINKERS and smokers may be slugged with hikes to the cost of cigarettes and alcohol in tomorrow’s budget.

So-called sin taxes taxes on tobacco and alcohol products are often seen as easy ways to boost government revenues as they target products which are considered unhealthy by a large proportion of the population.

Moderate increases to both cigarettes and alcohol would not only change the over-the-counter price but also aim to curb consumption and bad habits such as binge drinking and chain smoking.

H & R Block director of tax communications Mark Chapman says Labor has already announced, if elected, it would impose four increases of 12.5 per cent each on tobacco and there is speculation that the Coalition may impose an increase at a slightly lower rate, possibly four increases of 10 per cent each.

Based on the government making an announcement along these lines tomorrow, and with the average cost of a packet of cigarettes in Australia at around $25 today, smokers could be looking at a shelf price of around $37 by 2019, Chapman says.

He says sin taxes are a fairly easy sell electorally.

I wouldnt be surprised to see alcohol taxes go up too, although the power of the alcohol industry lobbying groups may lead to a push back.

The government says it will slash the $1 billion WET wholesale wine subsidy which should help smaller local producers and cut the prevalence of cheap, bulk wine.

If the federal government adopts a volume-based tax proposal to hike wine, beer and spirits it would raise an extra $2.9 billion a year, according to research house IbisWorld.

Wine prices could rise by $3.80 per bottle and draught beer drinkers would pay about five cents more per glass under such an alcohol tax rise.

From both a public health and a revenue raising perspective such increases probably make sense, Chapman adds.

Lender Liberty Financials spokeswoman Heidi Armstrong says these rises to discretionary spends can really hurt your budget and can quickly amount to hundreds of dollars a week.

Look at how you are spending your money and where your money goes with your current behaviour,’ she says.

We often dont like to look at things under the microscope about ourselves until we are ready to make a change but by doing this it can be a wake-up call to making better decisions about how you spend your money.