By Andrew Starke
Wine producers Treasury Wine Estates and Premium Wine Brands have called for significant changes to the way wine is taxed in Australia to help address the oversupply facing the industry.
Both have thrown their support behind substantial wine tax reform in the lead up to the federal government’s Tax Forum next month (October).
The former Foster’s group wine business, Treasury Wine Estates (TWE), advocates the abolition or fundamental reform of the Wine Equalisation Tax (WET) rebate and the taxation of wine on a volumetric and revenue neutral basis, with a phased introduction to allow industry time to adapt.
“Tax has a fundamental influence on both the structure and sustainability of the Australian wine industry,” said Treasury Wine Estates CEO, David Dearie.
“In the context of our industry’s current challenges, ambitious reforms are urgently required if we are to achieve our vision of an Australian wine industry that is economically, socially and environmentally sustainable.
“In particular, the WET rebate must be abolished or fundamentally reformed.
“Significant wine tax reform won’t be easy to implement and we understand the considerable impact it will have on some sections of the industry, and therefore advocate the need for appropriate support and transition arrangements.
“It will, however, be critical if we are to fundamentally address our industry’s challenges and protect the sustainability of Australia’s wine sector over the long term” said Dearie.
In its submission to Government, Pernod Ricard’s wine arm, Premium Wine Brands (PWB), cites recent figures for vintage 2011 as showing an increase in wine production, despite adverse weather conditions, as further evidence that industry efforts to tackle oversupply have not resulted in any significant restructuring.
Premium Wine Brands wants Government to reconsider its policy position in relation to wine tax arrangements and has suggested the abolition or significant reform of the WET rebate system that currently provides a subsidy to all wine producers totalling over $200 million per year.
“The sustainability of the industry is seriously threatened by oversupply and the real damage to the strong brand that Australian wine has built for itself over years that this is causing,” said Premium Wine Brands Chairman and CEO, Jean-Christophe Coutures.
“Industry efforts to restructure have not succeeded and there is an urgent need for intervention to remove impediments to the restructure process – we believe that this includes the current wine tax arrangements and we would like to work with industry and Government to address this.”
They may have different motives, but Government’s own organisations have been telling it for years that the tax in its current form makes no sense with the Alcohol Education & Rehabilitation Foundation (AERF) earlier this month (September) renewing its call for urgent reform.
“The current tax arrangement doesn’t make economic sense, it doesn’t make sense for the health of Australians, and it doesn’t make sense for the wine industry,” said AER Foundation chief executive, Michael Thorn.
“Over the last decade, eight reviews including the 2010 Henry Review into taxation found the WET to be inequitable and it’s about time the Australian Government did something to reform this tax.
“The report shows that wine benefits from the current tax arrangements by up to $1.5 billion a year by not being taxed in the same way as comparable products like full strength packaged beer.”
A spokesperson for the Winemakers Federation of Australia (WFA) said the industry body would not engage with the AERF on alcohol taxation policy.
“That is a complex area of policy debate that goes beyond the AERF’s simplistic mantra that the only way to deal with issues of alcohol abuse is to make alcohol more expensive,” he said in a statement.
“The Federal Government considered all these issues during and after the Henry Review and took a common sense position.
“Despite the AERF’s claims, evidence shows increasing price doesn’t stop problem drinkers drinking to excess – it just makes alcohol more expensive for ordinary people who drink in moderation.”
Basically the big boys want the WET rebate abolished so they monopolise the market and dictate terms, kinda like super markets and big brewers. They made the mistakes that put them in the situation they are in, they invested in the industry they are in, and now they want someone else (small guys) to pay to increase their own bottom line. Sounds like the Australia i know, wont be surprised if government do what they are told.
As a small producer that currently benefits from the WET rebate it may seem surprising that I agree that the current tax policy needs reforming. At present the there are far too many loopholes in the way a good policy is enacted that make the effect of what was necessary industry insurance into a swill trough with many of the wrong snouts accommodated. Why are New Zealand producers receiving the rebate for example and producers with neither vineyard or production facilities? Reform and toughen the criteria for sure but please don’t throw the baby out with the bath water when genuine small producers are still struggling. The innovation our industry needs will not come from the big players and if our industry loses the grass roots vignerons then our reputation as a producer of low value, characterless, industrial, plonk will be cemented into place.