wine tax

Whilst the Commonwealth Government has proposed to address integrity concerns with the wine equalisation tax (WET) rebate (by reducing rebate caps and tightening eligibility criteria) , these reforms do not address the underlying problems caused by the WET to the competitiveness Australian wine industry from the needlessly high compliance costs and distortionary economic impacts. Australian industry leaders have identified the WET policy as stymying the industry. The WET is very different to the policies of “old world” wine countries and emerging competitors who (apart from the standard value added tax) impose zero or low amounts of extra indirect taxes on wine. Also, the WET provides a significant competitive advantage to the New Zealand wine industry. The externality costs associated with wine are over stated, and in any event, a WET (or excise) do not target the problem drinkers.

If there is a political need to impose an additional indirect tax on the struggling wine industry, a higher rate of GST on wine would be the simplest and better option.