Treasury wallah Ken Henry has thrown a very tricky handful of marbles under the feet of the wine industry with his recommendation that the current scramble of alcohol taxes be replaced with a simple excise.
For seasoning, he’s thrown another handful under the political dries who want to tax kiddylikkers – and spirits – to oblivion. With state and federal elections brewing, we’re in for a spat of extreme panic in Pollyville, as the mighty grog lobbies get to their nefarious work.
Wine is currently taxed on the value of the unit sold, be it bottle or bladder. Under an excise, which is a tax on the total alcohol each unit contains, the cost of a $14 bladder pack would double, to $31.07, while a $30 bottle would fall to $27.53. These KPMG figures would see your favourite boutiques boom, and the Murray-Darling Basin wine industry collapse.
Never before has the gap between the polarised wings of the wine business looked wider. But industry bodies, like the Australian Wine And Brandy Corporation, which is partly funded by the taxpayer, are obliged to represent everybody in the business, so will have to protect the bladder boyos, who produce half the wine consumed, if not made, in Australia.
These two ends of the business have always been at war. It was Brian Croser who went to Canberra at the onset of the GST and current messy regime and organised the Wine Equalisation Tax, which offered newly disadvantaged small producers an annual rebate. This writer argued contentiously at that time that an excise was the only clean, logical manner of taxing alcohol. It was a classic Aries versus Virgo reposte.
Croser came home touting his deal as a great victory for the entire industry. I argued that it was terribly messy, and would only postpone the inevitable collapse of the discount bin business. It would simply keep the huge irrigating industrialists on side with the tax-dodging doctors and lawyers with ill-conceived hobby vineyards. No doubt Croser had discussed this at great length, over many Bridgewater Mill lunches with the likes of Alexander Downer.
Not to mention folks like Amanda Vanstone and Robert Hill, who co-owned the relatively tiny Amicus brand with Walter Clappis. These guys had a very heavy pull on John Howard’s wine taxation philosophy.
An open, far-sighted mind might see Henry’s proposal as the perfect opportunity to cleanse the big rivers of the scourge of an industry which is in such gross, nay, grotesque, oversupply to the extent that it’s collapsing anyway. This would release water to the Murray mouth, and remove the source of much of the alcohol consumed as an alternative to sniffed petrol in Aboriginal communities, not to mention an unseemly slice of the national health services bill – skin colour aside.
It would also, according to the Winemakers’ Federation of Australia, result in the loss of 12,000 jobs. While the cynic might argue that these jobs are going anyway, the idea of the new tax will fill many country electorates with even more fear and depression. The milder sceptic could suggest that the discount wine industry is in permanently deep merde as long as the international wine glut continues, and that any movement which might lead to its diminution is something healthy which much be addressed.
Apparently Henry has stepped his excise numbers: the brackets would be 3.5 per cent alcohol and below, then up to 5 per cent, 7 per cent, 10 per cent, 15 per cent, and above 22 per cent.
This would also favour the premium wine lover who has spectacularly, internationally, turned away from the sorts of dead-head alcohol bombs we’ve been rotely making in the 12 years since one American critic, Robert Parker Junior, began to tout them. While the wine blog explosion has seen Parker lose some power, the notion of an increased tax on wines above 15 per cent would surely be a strong incentive to Australian winemakers to return to healthier alcohols. Sales of more modestly balanced alcoholic wines should increase internationally.
In the meantime, a relaxing of the stifling tax laws and regulations on distillation could see a great deal of the wine glut converted to industrial alcohol, the income from which could perhaps be devoted to funding the next vine-pull scheme, which seems increasingly imminent, and would be likely to see a permanent cessation of irrigating to produce wines which sell for less than the price of bottled water.
As for the price of alcopops falling from $3.30 per unit to $2.42 – and at the risk of adding complexity to Mr Henry’s pristine simplicity – perhaps the excise should be extended in the case of premixed drinks to include an extra charge on sugar and other sweeteners when mixed with alcohol. If caffeine was also included in this kiddylikker, another hike could be imposed. Banning such cocktails is futile: anybody can whup down three or four stiff short blacks between sessions in the boozer.
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