Tax Rebates Cause Too Much Cheap Wine

September 28, 2011 International TaxationNew Zealand Taxation

Wine taxesAustralian winemakers are calling for a revision of tax measures which they say are allowing the market to be flooded with product, and reducing profits in Australia and New Zealand.

Two Australian winemakers, Premium Wine Brands and Treasury Wine Estates, are calling for a removal of the currently active Wine Equalization Tax (WET), which they claim is unjustly supporting economically unsustainable wine producers in Australia and New Zealand.

The WET system is a value based tax which is charged on all Australian and New Zealand wines that are sold in Australia. Under the current WET scheme, wine producers are able to claim rebates on all wines sold in Australia, up to a maximum of AUD 500,000. According to Premium Wine Brands and Treasury Wine Estates, the rebates are allowing unsustainable producers to continue operating, which is flooding the wine market and diluting profits.

Currently, Australian wine producers receive AUD 200 million back in tax rebates from the WET system, New Zealand producers are reported to see a rebate of AUD 30 million per year.

The Australian wine market is already seeing a bumper year for production, with higher than typical yields from grapes. Alongside the large number of functioning producers, the wine sector is experiencing lower than usual individual company profits. Recently calls have also been made to revamp the tax system, as the significant wine production levels are leading to excessively cheap alcohol in Australia.

Photo by Jaymi Heimbuch