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Wednesday, 31 March 1999
Page: 4843

Mr ANDREN (1:03 PM) —I wish to inject into this debate some of the concerns of smaller wine producers in my area about this wine equalisation tax. I am persuaded by the arguments of these producers that any top-up tax on wine over and above the goods and services tax should be volumetric and not ad valorem. To base the tax on the price of wine directly impacts on those smaller producers who create a high quality, relatively high cost product compared with the lower price bulk wine sales of the corporations. The National Coalition of Small Wineries rightly point out how this taxing approach subsidises cask wine.

Small wineries are a large part of the burgeoning wine industry in this country. One has only to travel between Young, Cowra and Orange these days to see the dramatic increase in grape plantings, with several thousand hectares having been planted from early this decade. Much of those plantings have been done by smaller wine producers and their object is quality rather than quantity. Yet small wineries are now set to pay at least four times more tax per litre that the corporate wineries pay for their cask wine.

One of the most successful wine producers in the Orange district is Stephen Doyle with his Bloodwood product. He has set out for me in great detail the argument against the manner in which this tax is being imposed. He points out that the 20 largest producers of wine in Australia account for over 97 per cent of production, while the remaining 900 small producers share the balance. Mr Doyle's Bloodwood Wines sells approximately 25,000 litres per year on which he currently collects about $100,000 in wholesale sales tax. Proportionately, Bloodwood pays much more of its income to the federal government than does a corporate producer like Southcorp.

Small producers have already been struggling by having to fund the wholesale sales tax in advance. While having to remit the tax by the 20th of each month, most clients of the small wineries do not settle their invoices for 90 days, thereby creating an enormous cash flow problem.

Mr Doyle and other smaller producers believe that the WET further discriminates against smaller operators. He asks why we cannot exempt small wineries as California does as recognition of the role they play in supporting fragile rural communities across Australia. In fact, the US government provides a full rebate of volumetric wine excise taxes to its smaller wineries as part of its policies to promote small business and expand fine wine exports in an expanding world market, notwithstanding the downturn in Asia.

Growers I have spoken with in my area believe that, if we are going to improve this important part of regional industry, export sales and tourism, the WET proposal—the prepayment of the wholesale sales tax and the discrimination by dominant corporate wineries against smaller producers—needs to be addressed if we really want a fair tax system.

In the same way that the GST discriminates against the lower income earner with no discretionary spending or tax minimisation opportunity, so too does this wine equalisation tax discriminate against smaller wineries and producers. It risks nipping in the bud one of the few success stories in rural and regional Australia in recent years.

The measures in this bill are designed to ensure that a representative four-litre cask need not rise by more than the estimated increase in the CPI. As well, a carton of regular strength beer also need not rise by more than the estimated CPI, low alcohol beer will not go up, whisky remains the same and a so-called representative bottle of wine is not expected to go up by more than three per cent.

That is all very well, but according to the National Coalition of Small Wineries—whose detailed submission to the Senate GST inquiry deserves close reading by all those interested in the non-corporate wine industry—any reform of wine taxation needs to take account of the fact that there are two distinct sectors in the wine industry. The submission says:

. . . regrettably, if the current unbalanced discrimination is to continue, then not only will the small wineries become further marginalised, with the consequent loss of jobs in rural and regional areas, but also it is predicted many hundreds of existing small wineries will be forced out of business.

The submission goes on to say:

The proposed ad valorem top-up tax will also discourage new investment in small wineries.

That, indeed, it will do. These small wineries have been worth many millions of dollars to rural economies right throughout Australia in the past 10 to 15 years, helping support a rural economy that was in sad decline in other commodity areas.

Not only are small producers defending their own patch but the Industry Commission's 1995 report into the wine grape and wine industry came down with a finding in favour of a volumetric tax. The Industry Commission report recommended a composite approach to the taxing of wine for domestic consumption. The ad valorem or GST component would be coupled with a specific volumetric tax collected at the consumption stage. The commission's inquiry committee considered that this would most efficiently address both the revenue raising and cost of alcohol abuse objectives of wine taxation. That is exactly the point that has been made to me by a great student of the wine industry, Stephen Doyle, in his submission and in the long discussion I had with him a fortnight ago, and also with a group of local wine producers as recently as last Friday.

They point out that the growing small winery industry, with its export potential, is exactly the sort of industry we should be fostering for both its export potential and its tourism potential in regional Australia. If we are going to crush it with an ad valorem tax, we are crushing job opportunities by the hundreds and we are beginning to strangle an industry that is just starting to grow, particularly on the tablelands and slopes of central western New South Wales.

So the burgeoning small producer industry is under real threat from this tax. I hope members in the House are listening to the logic of those small producers and not to the well-oiled campaign of the corporate dominated Winemakers Federation. I trust that those members in seats with wineries dominated by the large corporate winemakers will not succumb to their assessment that this is a fair tax for the industry, because it is not.

Much of the cask wine placed on the shelves by the corporate wine makers in this country is not the product of careful grape vine management and vigneron expertise. All of that effort and expense and investment goes into an elite—not an exclusive; an elite—top of the market international wine market. Much of the cask wine is, in fact, an overseas product. It is imported, much of it disguised as apparently local, with former private local labels bought up by the corporations and still named so as to give them a user-friendly, happy, small family type appearance. But the wine is imported from France or Spain. Orlando's cask is a Spanish dry red. You can find imported wine right through the bulk and cask wines that are on the shelves. So much for a tax system supporting the local industry. Again, it is all about looking after the major producers at the expense of the growing little producers who are producing the quality product.

In comparison to the big wineries, the production costs of small wineries are obviously far higher while volumes are low. The proposed ad valorem tax will force many out of the market. My electorate and many parts of rural and regional Australia, which are gaining so much from this growing industry, will not forgive any government or opposition that fails to recognise this. You might ask: why opposition? While the amendments that I have here and have looked through are reasonable, I do not believe they attack the major problems of this tax for smaller operators.

The member for Lyons, the distinguished Deputy Speaker, alluded to these problems in his contribution, but I do not see any amendments that are relevant to the comment he made that the smaller wine industry is being cut off at the knees. These amendments certainly do not substantially address that. The major wineries, the corporate wineries, have leant on the major parties. These amendments do not go far enough. I will certainly make my electorate's concerns known in the hope that this bill will be attended to substantially and fairly in the other place.

Promotions and door sales exemptions are important concessions, but the suggested amendments just do not go far enough and do not address the imposts this ad valorem tax will have on the smaller operators. Nonetheless, I will support these amendments. But they are minimalist. Because I oppose the GST in principle, I then cannot support the body or thrust of the bill anyway.