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Jun 27, 2012

 The Government has turned a deaf ear to calls from grape-growers and winemakers to collect its $170 million a year wine excise tax from retailers rather than wineries.

A spokesman for Economic Development Minister Steven Joyce said the benefits of a change in the way the tax was applied needed to outweigh the costs of doing so for the Government and the industry.

"Because of the large number of wineries selling in a market with a few big retailers, it is unlikely that changing the point of collection would materially alter the profitability of the wine industry or change how the cost of excise is passed on to consumers," the spokesman said.

Replacing the wine excise with a sales tax would probably result in buyers paying less to the winegrowers or wineries to reflect any additional tax placed on them.

"Overall there would be little, if any, benefit to the winegrower compared to the current excise arrangement," the spokesman said.

Marlborough-based wine industry leader Stuart Smith argues that taxing wine drinkers rather than the producers would better address social policy goals.

The excise tax, which is adjusted annually on July 1 and applies only to domestic wine rather than exports, has been a perennial thorn in the side of the industry.

The official industry journal, New Zealand WineGrower, said that after last year's increase of 12 cents a litre – the highest rise in 20 years – any further adjustment would border on the destructive.

Mr Smith is an outspoken opponent of the annual adjustment, which is based on movements in the consumer price index for the year till March 31. The present tax is $2.72 a litre which, combined with GST and fuel costs, has hit the wine industry, which is a $1.1billion annual export earner.

The industry had tried to raise the issue with politicians and through the normal channels "for many years", but with little success, Mr Smith said.

The issue was topical because of the social policy debate on the Alcohol Law Reform Bill.

"[Excise is] thought of as a lever that could be used to influence the price of alcohol when in fact it isn't," he said.

The industry accepted that the Government had to collect income tax, but the excise was not reaching the market as a social policy goal, Mr Smith said.

"We believe it should be shifted to be collected off the consumer rather than off the producer so it becomes a price disincentive, as it was meant to be. The tax could still be taken, just at the other end of the cycle."

The excise should be collected after GST so that when an item was purchased, the excise tax was added. 

"It sends a clear price signal to the consumer."

Winegrowers chief executive Philip Gregan agreed the excise should be considered in a social policy context.

"If you're going to achieve some social policy goals with it, then you're levying it entirely in the wrong place."

Most wineries were not able to pass the increases on to the retailers and Mr Gregan said its data showed some wineries had not had a price increase in five years, but were absorbing the annual excise adjustment. Marlborough pays $127m of the $170m collected each year in excise tax.