Untaxed whisky

page 258

The cause of colonial distillation's downfall was the tax dodging distillers themselves.

The structure of my historical description of colonial whisky-making in Tasmania was divided into two parts: Legalisation and Prohibition. I changed this to  "A Pleasant Command" and "Its evil consequences". Unfortunately, the two parts were pushed far apart and some details from Part 2 were removed.

The corrected text is 

a pleasant command …

The United Kingdom revolutionises its distillation laws between 1814 and 1823 and Inland Revenue skyrockets. Australia swiftly adopts the liberal approach. In February 1821 Australia’s Governor, Lachlan Macquarie, issues a Distilling Proclamation. Under certain proclaimed conditions, distilling—until this moment outlawed—is now legal throughout the colony.

If you have a Licence. Obtainable after you pay a sum of £25, and after you surround your Works with a Wall not less than ten Feet high, procure Casks of not less Content than sixty-three Gallons (300 litres), distil from GRAIN, to wit:—Wheat, Rye, Barley, Oats, or Indian Corn, the actual GROWTH of the Territory of New South Wales and its Dependencies, and so long as no still of yours is of less Contents than Forty-four Gallons (200 litres) and agree that Distillation shall always commence on Monday and you do not also retail Spirits, then, and only then, you may distil. But only so long as the price of Wheat does not exceed 10 shillings the Bushel. As incentivation, an approximately 15 per cent lower excise rate is set for local spirits.

Macquarie’s Proclamation will come into effect in eighteen months: August 1822. But why make whisky when there is plenty of grog, including whisky, already available through importation? To make money. The economic theory runs: the island grows barley as well as wheat, corn and rye. It has abundant water, unceasing convict labour, numerous mechanics, talented brewers, deep bondstores and a very thirsty population. If we grow Tasmanian we increase employment. If we buy Tasmanian, we cut imports. We’ll be richer and more self-sufficient. Legalise distillation and enforcement costs will plummet, tax revenue will increase and the supply of happiness will proliferate.

& its evil consequences

Within sixteen years of this glorious start all the distilleries find themselves up Whisky Creek without a paddle again after Governor the government's decision to ban distilling altogether in 1839. Why?

The industry today accuses wowsers of destroying their predecessors, and the memorable aphorism ‘It is better to cast the products of harvest to the pigs than to transmute men into swine’—said to be the composition of the governor's wife, Lady Jane (Franklin)—is often quoted as proof; however, Jane’s award winning biographer, Alison Alexander, told me the words do not appear in Lady Jane’s correspondence nor in her diary and, according to the Historical Records of Australia team at the University of Tasmania, they are not in Governor Franklin’s papers either. (The first record I could find is an editorial in The Examiner twenty years later, during the 1860s.)

The cause of the distillers downfall is entirely different.

Wowser sentiments are widely held in the 1830s. Sir John favours sobriety, Temperance is in ascendancy, and its campaign against distilling is materially aided by Peter Degraves who promotes the health-giving benefits of beer—say, his Cascade Brewery beer (beer is wholesome and British, lowest in alcohol and therefore least threatening), but neither Franklin nor Degraves'  ideas or interests are decisive. The four reasons given for prohibition in the decisive report to the Legislative Assembly in 1838 are: In the first place to end the loss to the Revenue. In the second place to improve the health and moral order of the convicts. In the third protect respectable publicans from unscrupulous admixture. Fourthly, benefit trade.

High above moralizing and business rivalry stands Treasury. In the report, Moral order, respectable publicans and agricultural impacts are dealt with in a paragraph each. The revenue calculations take up five pages. The most influential issue—as ever—was the money, and for that shortfall the distillers have only themselves to blame. In 1825 Lowes & Co., for example, pays £18 duty on 125 gallons of Whiskey. Supplying government this amount of revenue buys you the equivalent amount of government support. The distillers paid, in total, about two thousand pounds per annum in excise, but the Treasurer estimated that with annual production of 26 000 gallons (probably not surpassed until 2005) the Revenue was entitled to (and had therefore been defrauded of) approximately ten times more. £20 000 was annually unpaid.

How was the swindle accomplished? Some insight into the malfeasance leading to the shortfall is glimpsed by the testimony of the turncoat John Turnbull. Brought up a distiller in one of the largest distilleries in Europe (Stein & Company, Edinburgh), Turnbull married a local and began distilling at the Derwent Distillery around 1837. He advised the Legislative Council on a suite of regulations to guard against distillers defrauding the revenue through undetected production. As well as many more locks and keys, a seal, on-site revenue officers and duplicate minute books, Turnbull recommended that the safe at the worm not exceed twelve by nine inches (to prevent any adequately sized vessel being introduced to carry away the spirit) and also that no separate brews be mixed together, which deprived the check of ascertaining the gravity of each, and no yeast be added to brews until the officer makes his charge against the Distiller upon each separate Wort etc. etc. & etc. And as well, notice be taken of overproof—which currently another 30% take.

As well as undeclared sales and overproof, there is saccharine. Distilling sugar cane is quicker, simpler, cheaper and more reliable than barley, but because it is imported it violates the Act’s purpose. “It is notorious that large quantities of Colonial spirits are…passed into consumption without the payment of any duty at all, in consequence of the absence (as it was believed) of any legal authority for imposing a duty on spirits distilled from sugar.”

And there are accomplices… like the 10-foot wall. The distiller keeps the key to his stronghold’s gate and any inspector can be locked out until everything is in order. Publicans too, probably in league with distillers, set up excise tax avoidance schemes. They buy for less but charge more. The government report noted that “It appears…that…Colonial spirits are rarely, if indeed ever, sold by retailers as Colonial Spirits—that nothing is ever asked for in public-houses but Rum, Hollands, or Brandy—and that Colonial spirits are mixed with Rum in very large proportions, approximating not unfrequently to half-and-half, notwithstanding the heavy penalty imposed by the Act.” Selling the admixture as the more expensive import boosted the publican’s revenue considerably.

Another factor in the industry’s demise is hinted at in the drinkers’ preference via the assistance of distance. Chris Middleton postulates that “after months of storage on the docks and then a long and turbulent voyage through all the world’s climactic zones the Scottish-made whisky matured into a darker, mellower spirit. Australia probably landed the best whisky in the world.”

The government report concludes that “The more we weigh the evil consequences of Colonial Distillation, the more convinced we are that the sooner it is substantially prohibited, the better it will be for all parties except the Distillers…” The Act passes in November 1838 and distilling is suppressed from January 1839. The compensation battle with the distillers then begins.

Meanwhile, to meet demand illicit distillers increase production. Legality has encouraged illicit distillation, too, because any cask from anywhere could be trundled through the front doors of taverns in broad daylight unquestioned. In 1824, at the height of legal distillation, a party of soldiers seize a still together with three mash tuns hidden on the near-impenetrable banks of Browns Rivulet nine miles out of Hobart town. O’Brien’s Bridge (Glenorchy), already an infamously nefarious neighbourhood, supports curlew distillers who trade liquor for two or three shillings a gallon. Egg Island hides a distillery in a manuka thicket during the 1840s supplying thirsty wood splitters with poteen. Twenty years later during the 1860s the Colonial Treasurer is still serially publishing notices warning of ‘Illicit distillation being carried out in various parts of the colony to the serious injury of persons lawfully engaged in the sale of Spirits and to the detriment of Public Revenue—a reward of £100 is offered for information leading to seizure of stills and conviction’.

Against legal distillation, Franklin’s ban stood for only eight years. It was lifted in 1847. A Royal Commission in 1869 that reorganised distillation permitted stills as small as 40 gallons (180 litres), but no one took up the opportunity. Another attempt was made in the 1890s. It was held up pending Federation. Federation’s national Distillation Act banned any still of less than 600 gallons (2200 litres). It would be a century before anyone fired a still that large in Tasmania. Bill Lark walked into the castle of the Commonwealth’s Customs Office in 1991 seeking a licence for his one-gallon still. They wanted to help, but out of ignorance they at first turned him down. When the law was explained to Customs and they were brought to their senses the Larks received the first General Distillers licence issued in Tasmania in 152 years. It is a red letter day, but nationally the gap is very short indeed. The whisky expert Chris Middleton cites numerous small-still licences—some for whisky—issued in New South Wales, South Australia and Victoria between 1950 and 1990, moreover, the massive Corio distillery was operating continuously between 1927 and 1989.

There has perhaps never been a day since 1788 when some form of Australian made whisky has not been available for sale somewhere. With alcohol government faces twin terrors, and their dilemma is this: a populace out on the streets and drunk on ardent liquor is not only a threat to public order, to life and limb, and civilization, but also to state control. On the other hand, prohibition has provoked more than one revolt. And in between is the state’s own craving for tax revenue. No wonder evil flourishes.

Bernard LloydComment