Australian major wine brands advocate tax reforms opposed by wine bureaucrats

Posted by AFN Staff Writers on 27th September 2011

While the Winemakers Federation of Australia (WFA) has said changing Australia’s wine taxation system would be futile, two of Australia’s leading winemakers are taking an opposing stance.

In a recent statement, the WFA had said, “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. Cask wine consumers, for example, are generally pensioners, who only have one or two glasses with their evening meal. The way to address excessive drinking is through education and cultural change.”

However, leading wine companies, Treasury Wine Estates Limited and Premium Wine Brands, have released copies of their separate submissions to the Australian Government’s Tax Summit, which is due to take place in October 2011.

Premium Wine Brands, which owns global wine brands such as Jacob’s Creek and Wyndham Estate, said it believes the current wine glut poses one of the most serious challenges facing the Australian wine industry.

The Australian Government has expressed the contrasting view that wine tax reforms should not be implemented, citing the wine glut as one of the reasons.

In its submission, Premium Wine Brands states that current wine tax arrangements are “impeding efforts to restructure the wine industry as they distort market forces that would otherwise operate to address the structural oversupply issues”.

Premium Wine Brands has called for a major reform of the Wine Equalisation Tax (WET) rebate system, which currently provides a subsidy to all wine producers. It suggests taxing wine on a volumetric basis, with the tax rate set at a revenue neutral level (in line with the existing category-based tax approach).

Premium Wine Brands Chairman and CEO, Jean-Christophe Coutures said, “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. 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.”

Other Australian market leader Treasury Wine Estates, which owns the well-known Beringer, Lindemans, and Wolf Blass brands, is calling for similar reform of the Wine Equalisation Tax (WET) rebate and for suggesting wine to be taxed on a volumetric and revenue neutral basis.

Treasury Wine Estates said, “The WET rebate is preventing consolidation and sustaining uneconomic production, at a time when the industry urgently needs to retire excess supply and rebuild value in the Australian wine category.”

Both submissions follow other calls for wine tax reform in Australia such as from the non-profit Alcohol Education & Rehabilitation Foundation (AER Foundation), which was previously reported by Australian Food News.