Tax change could leave bitter taste

Winemakers are bracing for an increase in taxes after the federal government took its first steps towards fighting binge drinking with the imposition of an additional levy on the ready-to-drink sector of the market.

Key wine lobbyists initially backed the government’s commitment to tackle binge drinking but have reportedly shown concern that higher taxes on wine could be the result.

Wine people generally believe that their product is not at the heart of the binge drinking issue; and that may be the case when it comes to bottled product.

But there is plenty of evidence that cheap wine, such as that packaged in cardboard casks, figures strongly where alcohol consumption is a big problem.

And that leaves wine producers in a difficult situation.

Wine is already taxed heavily as a percentage of its price, but a tax increase substantial enough to curb binge drinking of cask wines could have an exponential effect on higher value wines if applied across the sector.

This may not bother the government if it perceives it simply as a tax on the rich, hitting the chardonnay set in the hip pocket, especially the small percentage who can actually afford expensive wine.

Producers, however, could justifiably point out that higher taxes on quality wine would threaten what is one of Australia’s great value-adding industries. Furthermore, wine in moderation has proven health benefits.

Of course, the wine industry might have headed all this off at the pass years ago if it had taken on the policy put forward by the Western Australian Wine Industry Association under the then leadership of Leeuwin Estate founder, Denis Horgan.

Mr Horgan crusaded passionately for the industry to seek a change in the tax mechanism so that money was raised on the alcohol content – the dangerous element in the wine – rather than on price.

That would have made the tax on a cask of wine, the binge drinker’s favourite, more than on a bottle of the good stuff.

Mr Horgan wanted the changes to be part of the introduction of the GST when the government had to redo the taxation of alcohol anyway.

But the industry is dominated by producers who rely too heavily on cask wine sales, and it resisted this change.

With the government’s new focus, it appears the whole sector may pay a price for that failure to act back then.