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News from AUS: Strange Wine Health Claims & The End of Wine Tax Rebates?

Two items of wine business news from Australia this week have possible implications in BC:

The End of Wine Tax Rebates? Two of Australia\’s major wine producing companies have called for sweeping reform of Australia\’s current wine tax system which is similar to BC\’s system. The Australian approach includes a 29% \”wine equalization tax\” on all wine consumed in Australia. However, Australian producers have been eligible for a \”rebate\” of the tax in most situations. The unequal treatment of imported and domestic wine prompted trade complaints from both New Zealand (which complaint was settled by making its producers eligible for the rebate) and from the EU. Now, Treasury Wine Estates (Penfolds, Wolf Blass, etc) and Pernod Ricard (Jacob\’s Creek) have both called for an immediate overhaul of the system. Treasury\’s CEO stated:

Tax has a fundamental influence on both the structure and sustainability of the Australian wine industry. In the context of our industry’s current challenges, ambitious reforms are urgently required if we are to achieve our vision of an Australian wine industry that is economically, socially and environmentally sustainable. In particular, the WET rebate must be abolished or fundamentally reformed. It is untenable to have a tax mechanism that inhibits restructuring and works against the long term best interests of our industry, whilst also costing Australian taxpayers more than $200 million a year. Significant wine tax reform won’t be easy to implement and we understand the considerable impact it will have on some sections of the industry, and therefore advocate the need for appropriate support and transition arrangements. It will, however, be critical if we are to fundamentally address our industry’s challenges and protect the sustainability of Australia’s wine sector over the long term.

See here for more commentary and analysis on this story: Treasury Calls for WET Tax Abolition or Shake-up and WET Rebate Doomed to Dry Right Out. As noted above, BC\’s current wine tax system is similar to Australia\’s in that we impose hefty liquor board markups (123%) at the wholesale level and then in most circumstances, provide exemptions or rebates back to local producers. Most wine producing countries provide some form of subsidy to their producers. However, these subsidies are normally provided in the form of agricultural or technical assistance. Few countries provide wholesale or retail price subsidies which have both the immediate effect of driving prices up for consumers and the long term effect of distorting the economics of the industry (as was noted in Andy Hira\’s recent report on the BC wine industry).

Wine Health Claims. A recent report by the \”Alcohol Policy Coalition\” in Australia generated media coverage because it claimed that the health benefits of drinking red wine are a \”myth\”. Judging from academic reaction to the claims in the report, it now appears that this report was based on temperance-type ideology and flawed science. Wine Spectator reports that there is little scientific foundation for the claims in the report and, even more significantly, the Boston University School of Medicine calls the report \”biased and unscientific\”, states that it is \”shocking\” that government agencies would align themselves with it and notes that \”the paper disregards the vast majority of well controlled studies which show significant and concrete public health benefits of moderate alcohol consumption\”: see \”A misguided statement on alcohol and health from a coalition in Australia\”.

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