Submissions to the Federal Government's Wine Equalisation Tax (WET) Rebate Discussion Paper close this Friday – let's hope this inquiry will bring some equity and simplification, asked vintner Des Caulfield.
“The Australian wine industry is one of the nation's most competitive industries globally, yet Australia is one of the highest taxed wine nations in the world,” said Caulfield.
“The tax rates are significantly distorting the market and holding back the Australian wine industry from being even more competitive.”
“When the GST was introduced in 2000, all wholesale sales taxes previously levied were discontinued. There was a confusing array of sales tax rates and the products to which they related. The GST, which replaced them, was to be a simple 10 per cent tax on retail sales regardless of the product, but with some exemptions.”
“The wholesale sales tax that applied to wine and a large number of other products when the GST was introduced came to 41 per cent. The imposition of the GST resulted in a significant reduction in the retail price of these products.”
Beer and spirit producers complained loudly that the reduction in the retail price of wine resulting from the removal of the 41 per cent wholesale sales tax put them at a disadvantage because the excise duty that they were levied continued despite the GST, resulting in a lift in beer and spirit prices, whilst the price of wine was reduced.
“To rectify this apparent anomaly the Government introduced a new 29 per cent tax levied on wholesale price of wine sold within Australia (i.e. excluding exports). And they called it the “Wine Equalisation Tax”, quickly shortened to the WET.
“So what did this do to the price of wine?,” asked Caulfield.
Here's one example:
$
Winery sells case of wine to retailer at net of tax price 100.00
WET is added – 29% 29.00
Price to retailer 129.00
Retailer margin – 25% 32.25
Retail net of GST price 161.25
GST – 10% 16.13
Price to consumer 177.38
Included in the final retail price is WET of $29.00 and GST of $16.13, a total of $45.13.
But Canberra did not stop at just a 29 per cent WET. It complicated the process by granting rebates of WET, initially to just smaller Australian wine producers, but then subsequently to sales of wine in Australia by all Australian and New Zealand wineries capped at $1.7 million annually per producer.
“In my opinion,” said Caulfield, “…the WET started as a mess and has become progressively more complicated, and as a result, it has been open to many rorts, that, to date, have not been adequately addressed.”
“It also ensures that the price paid by Australian wine drinkers’ is greater than that paid by the drinkers of the same Australian wine in many overseas countries.”