By Andrew Starke
The Government has for the moment discarded most of the recommendations put to it by the Henry tax review, with mixed results for the liquor industry.
The decision not to change the tax on alcohol has been welcomed by the wine industry but is a blow to spirits producers who would have paid less tax under the review’s recommendation of a volumetric tax converging over time to a single rate.
However, the industry will generally welcome maintenance of the status quo as some had predicted Government could take the opportunity to tie tax increases to its agenda around binge drinking
The Winemakers’ Federation of Australia (WFA) said the Government had shown courage in rejecting the Henry Review’s proposal to replace the wine-specific Wine Equalisation Tax (WET) with a volumetric tax system.
“We didn’t think they would take up the recommendations lock stock and barrel because it would have had a devastating impact on both wine and draught beer, but we did think there was some chance that the government would implement changes,” WFA’s chief executive, Stephen Strachan, told TheShout.
“From the wine industry’s perspective there is an overwhelming sense of relief that the recommendations were not taken up. It is also a sign of recognition from the government that the industry is going through major structural reforms.
“We always thought the government was listening to some of the arguments being put forward by the industry. It’s reassuring to know that they did listen. The wine, beer and spirits industries can now put this behind us and work proactively with the government to address alcohol abuse.
“It would have been an easy option to go for raising more revenue and appeasing a few vested interests, but it would have been illogical, unfair and dangerous,” Strachan continued.
“Unnecessary change would have devastated the wine industry at a time when it is dealing with its toughest period in more than two decades.”
The Henry review's rejected recommendation would have resulted in sharp rises in the prices of cheaper wines but cut the prices of premium wines.
According to WFA figures, taxing wine in the same way as packaged beer, and removing the WET Rebate, would see 95 percent of wine increase in price, sales volumes fall by 34 percent, 29,000 hectares of vineyard become redundant and about 12,000 jobs lost.
“Most of those jobs would be in regional areas where wineries are crucial contributors to tourism and thus to economic development,” said Strachan, adding that support for the existing wine tax system recognised the reality that wine was different from other forms of alcohol in the way it was produced, marketed and consumed.
“Wine is usually drunk in moderation by older adults and most commonly with food,” he said.
“It would be ridiculous to make ordinary Australians pay up to four times more to enjoy a glass or two of wine with dinner because we are concerned about binge drinking.
“We don’t deny that alcohol misuse is a problem, but we have to target the causes not make ordinary Australians pay because we can’t think of any better solutions.”
Distilled Spirits Industry Council of Australia (DSICA) information and research manager, Stephen Riden, told TheShout that the body would not be commenting extensively on the results of the review.
“The Henry Tax recommendations set out a rational and sensible way for Australia to tax alcohol, which is fair and that addresses social harms, rather than for revenue raising,” he said.
“DSICA will now look to working with the Government about the future changes to alcohol taxation.”
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