Although the Federal Government has consistently said that the inevitable adjustment to wine tax will be made in the budget after this one, the wine industry has breathed a rare collective sigh of relief that Government has ignored the recommendations of the Henry Review to adopt a volumetric tax on wine. A volumetric tax involving scaled levels of tax with respect to alcoholic strength has never been a viable option, since wherever the gradations between different tax levels might have been placed, the government would have been correctly accused of interfering in the winemaking process. Acknowledging his relief at the decision, WFA chief executive Stephen Strachan welcomes the time given to work closely with the government to restructure the industry and to address legitimate reforms on alcohol abuse. ‘If the intention of the tax is to promote health reform, the tax is a sin tax and should be volume-based, but if it is to raise revenue, it should be a wealth (ad valorum) tax’, he says. ‘I still have an issue about us putting up our hands for a sin tax, especially one that could be adjusted later to align wine with beer and spirits.’ Personally, I believe it would be a very brave government of any significant wine-producing country to align the tax applied to wine with that of beer.The result means that large producers do not have to make major adjustments to their business in a time of major industry crisis. Small makers fear that a change in tax would cause job losses, a loss of market share and chaos. They can now hang onto the WET rebate for a little longer. In short, the industry has been granted breathing space for it to complete the reform of its structures and processes in a consistent tax environment. The industry now needs to move quickly through this process, which will not be easy given the divergence of approach adopted by its larger players in these challenging economic times.Ultimately, I believe that the best tax for Australian wine is a volume-based one involving a single tax point per litre for table wines. While it will increase the price of wine sold in larger (cask) formats (which will gain the wine industry some much-needed breathing space on the health debate), it will also enable more profit to be made from bottled wines, especially those at higher prices, provided that wineries maintain their current retail prices. While no path ahead is going to be easy, this will also help Australian wine become more competitive and profitable in the area if most needs to be Ð as far away from the cask wine and the cleanskin phenomena as possible.
