Peak bodies are pushing for an urgent review of alcohol tax settings after researchers found almost one-in-three bottle shops visited across Victoria, NSW, and Queensland contained suspected illicit alcohol products.
The current tax settings are creating incentives for illicit alcohol trade and the situation cannot be allowed to continue, Spirits & Cocktails Australia executive director Steven Fanner said.
"We have a narrow window of opportunity to correct the course in spirits before it follows the same path we have seen in tobacco, where the illicit market now dominates," he said.
Australia has the highest spirits tax in the world outside of Scandinavia, the peak bodies said.
The excise duty on spirits is $107.99 per litre of pure alcohol, equating to more than $30 on a standard 700ml bottle.
The high excise on spirits is contributing to the current spike in illegal activity, Retail Drinks Australia chief executive Michael Waters said.
"The lesson from illicit tobacco is that once illegal markets become entrenched, they are much harder to unwind," he said.
"We do not want illegal alcohol to go down the same path."
In tandem, Victoria's former treasurer Tim Pallas has raised issues with a scheme that allows "fly-by-night operators" to keep up to $350,000 of the excise on alcoholic beverages released for domestic supply.
It comes as Victoria Police continues to investigate whether the illicit alcohol trade is behind a firestorm of arson attacks on licensed venues in Melbourne's nightlife precincts.
Two 18-year-olds and a 17-year-old were arrested on Wednesday morning for a series of arsons and attempted arsons, including an attack on the La Di Da nightclub on May 5.
Victorians are "sick and tired" of waking up everyday to another attack, Opposition Leader Jess Wilson said.
"I'm open to reform when it comes to illegal tobacco," she said.
"We need to look at the excise tax there and see if something can be done to reduce that trade. If that's the case with alcohol as well, then I'm very open to that."
Illicit alcohol poses significant risks to consumer confidence, public safety and the legitimate businesses operating responsibly within the law, Australian Distillers Association chief executive Kylie Lethbridge said.
Researchers from the National Drug and Alcohol Research Centre, UNSW and National Drug Research Institute found contaminants like methanol and plastic debris in some products on store shelves.
Melbourne teenagers Holly Morton-Bowles and Bianca Jones, both 19, died from methanol poisoning while holidaying in Laos in 2024.
At least six foreigners died during the mass poisoning event in the tourist town of Vang Vieng, including a British woman, a US tourist and two young Danish women.
The federal and Victorian governments have been contacted for comment.
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