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
"Overall there would be little, if any, benefit to the
winegrower compared to the current excise arrangement," the spokesman
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.
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.
industry had tried to raise the issue with politicians and through the
normal channels "for many years", but with little success, Mr Smith
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.
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
"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."
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.
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