Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Friday, 9 October 1931

Mr FORDE (Capricornia) (Minister for Trade and Customs) - by leave - I move -

That the bill be now read a second time.

This bill which is of a purely machinery character relates to an excise duty on wine, and will apply to any excise on wine which may be imposed by Parliament. It. is the intention of the Government, at a later date, by an amendment of the excise tariff to provide for a specific duty on wine. It is not proposed, nor is it desirable, at this stage, to indicate what rate of duty will apply. In 1930 this Government appointed the Hon. John Gunn, Director of Development in the Prime Minister's Department, and Mr. R. McK. Gollan, of the Department of Trade and Customs, to inquire into the wine industry in the Commonwealth, and to furnish a report.

Mr Paterson - Has that report been made available?

Mr FORDE - I think it has. The question was exhaustively dealt with, and one of the recommendations made in their report was in these terms -

That the present method of levying taxation on wine through an excise duty on fortifying spirit bc abandoned, and that in its stead an excise duty at the rate of 2s. peT gallon be imposed on fortified wine when the wine ia delivered for home consumption.

Previous to 1918 the rate of duty on fortifying spirits was a nominal one, and was imposed so that the amount collected would be sufficient to pay for the services of officers. It was necessary that the mixing of spirit with wine be closely supervised, and every operation was done in the presence of an excise officer. In 1918 the Government was in need of additional revenue, and a duty of 6s. per proof gallon was levied on spirits used in the fortification of wine. With the exception of dry sherry, fortifying spirit is only used in the manufacture of sweet wines of the port or muscat type. Fortifying spirit is not used in the production of dry wines of the claret or hock type. In 1925, in order to assist the growers of Doradillo grapes, the duty was reduced to 5s. so far as spirit made from this class of grapes was concerned. The duty on spirit made from all other classes of grape remained at 6s. per proof gallon. Since 1924 a bounty has been paid on fortified wine exported from the Commonwealth with a view to clearing some of the surplus production. Up to March, 1930, the payment of this bounty was made from the Consolidated Revenue. Owing to the fall in revenue and the heavy burden which the payment of this bounty placed upon the country, it was decided to ask the industry to pay the bounty.

Mr Latham - That bounty was paid in relation to the spirit contents, and not on wine as such.

Mr Paterson - It was a bounty. on wine.

Mr Latham - It was not strictly on wine as such.

Mr FORDE - The excise duty was on the fortifying spirit, and about 1 gallon goes to about 5 gallons of wine. The bounty was based on per gallon of wine exported, but a drawback of the duty was allowed on the fortifying spirit contained in the wine.

Mr Latham - The whole scheme was based on an excise duty on fortifying spirit.

Mr FORDE - The excise duty was levied on fortified spirit. We are now providing the machinery to levy an excise duty per gallon of wine instead of on fortifying spirit as formerly.

Mr E RILEY (SOUTH SYDNEY, NEW SOUTH WALES) - It will not cost the Commonwealth anything.

Mr FORDE - No. The Commonwealth will be in a slightly better position than formerly.

Mr Paterson - The system will need considerable policing.

Mr FORDE - The other system was becoming almost unworkable because of the volume of work that had to be done in bond. Although this system will require policing, I do not think it will be more difficult than the other system. Last year this Government was of the opinion that the necessary funds for bounty payments should be provided by the wine industry. The duty on fortifying spirit was then raised by 5s. per proof gallon, and it was provided that the amount collected at this increased rate should be paid into a trust fund from which payments for bounty would be made. The present rates of duty on fortifying spirit are as follow : -

Item 2 (j) (1) Spirit for fortifying Australian wine distilled wholly from the fresh fruit of doradillo grapes, subject to regulations - 10s. per proof gallon.

(2)   Spirit for fortifying Australian wine, n.e.i., subject to regulations -11s. per proof gallon.

In 1918, when the duty was levied on fortifying spirit for revenue purposes for the first time it was considered that this form of collecting a tax on wine was as simple as it was efficient. At that time this was so. Later, however, there was a great change in the economic conditions of the wine industry. Returned soldiers were established in vineyards on the river Murray and on the Mumimbidgee irrigation area in New South Wales. When the vines in the river Murray districts in South Australia came into bearing the State Government assisted the settlers to process the grapes by financing the establishment of wineries on a co-operative basis. This led to a surplus production of wine, and caused many difficulties in the industry. Duty on fortifying spirit was at that time collected at the time of fortification. The co-operative companies found they were unable to finance the payment of duty on fortifying spirit at the time it was mixed with the wine. They approached the Government with a request to be allowed to fortify the wine in bond, the duty on the fortifying spirit to be collected when the wine was delivered for consumption. Their request was granted. Other wine-makers were soon attracted by this concession, and at the moment nearly all fortification throughout the Commonwealth is carried out in bond. Other concessions followed this arrangement, and ultimately such operations as racking, fining, blending, and other similar operations were allowed to be carried out in bond.

Mr Jones - Both for export and for home consumption ?

Mr FORDE - Yes. As the export trade grew, wine-makers were allowed to export direct frombond. All these operations had to take place under the supervision of excise officers, and the conditions necessary to protect the revenue became so intricate and irksome that the wine-makers' business was considerably handicapped.

It has always been the practice when an article is exported to return any duty which has been paid on the article. When fortified wine is exported, therefore, the duty paid on the spirit used for fortifying it is returned to the exporter. This transaction is termed a drawback of duty. It is not possible, however, to arrive at the precise amount of duty which was paid on any particular wine exported. It was necessary in the circumstances to provide for a flat rate of drawback which covered the average amount of duty cost of fortifying spirit in each gallon of wine. The flat rate provided as the duty cost of fortifying at the present rate of duty is 2s. 4d. per gallon of wine. In some cases this amount is more than the actual cost. In other cases the amount is less than the actual cost.

There are no less than seven different rates of drawback. They deal with the various rates of duty and with various classes of wine. Rebates on spirit extracted from lees of wine have to be provided for, and the department has always been on the lookout for possible revenue leakages.

Referring to this matter in their report, Messrs. Gunn and Gollan said -

These drawbacks, rebates, and remissions relating to wine exported are necessary in order that the wine-makers and distillers may receive equitable treatment in the matter of having the excise duty already paid returned to them when the wine is shipped overseas. It is very necessary that effective methods bo adopted to supervise the exact quantity of wine dealt with so thatthe correct amounts of drawbacks, rebates, and remissions may be given. All transactions have, therefore, to be carefully scrutinized by officers to make certain that the amount of drawbacks, refunds and remissions are properly due.

With the removal of the duty on fortifying spirit as proposed in this bill, there will be no need for drawbacks, rebates, or remissions. This will be a great relief to the department as well as to the winemaker who finds that the drawback rates do not compensate him.

This bill provides that all persons who produce grapes for use in the manufacture of wine must be registered. No fee is to be charged. This practice is followed in. connexion with the producers of tobacco leaf, who have to register with the Collector of Customs in the State in which they live.

Mr Gabb - What is the object of registration ?

Mr FORDE - So that there will be some control over those engaged in the industry.

Mr Gabb - Is the Minister afraid that some of the small growers will make theirown wine?

Mr FORDE - We do not intend to stop them. Any grower can become a wine-maker on obtaining a licence, the fee for which is to be £1. Every grower will be asked to register as a grower under the act, and as the growers are getting some benefit in the form of a bounty, surely they will not object to registering. The tobacco-growers, who are not receiving a bounty, are all registered. Gold producers, also, have to register.

Mr Paterson - Will no excise be collected on wine exported, or will it be collected and refunded on wine actually sold for export?

Mr FORDE - On all wine an excise duty will be collected.

Mr Paterson - There will still be a drawback on export.

Mr FORDE - No. It will be arranged so that there will be no drawback on export, because all wine for export will be delivered free of duty.

Mr Paterson - The bounty will include the drawback?

Mr FORDE - The drawback will be eliminated altogether. This registration is necessary so that a complete record may be kept of the material from which the wine, subject to an excise duty, is made.

The bill also provides that no person shall make wine unless he is licensed to do so. The fee for a licence to make wine has been fixed at a nominal rate. Small wine-makers who store less than 50,000 gallons of wine may obtain a licence on payment of a fee of £1 a year. The wine-maker who stores over 50,000 gallons of wine will pay a fee of £5 per year.

Mr Crouch - What will be the position with respect to dry wine?

Mr FORDE - That will be dealt with under the excise schedule. The representations made by the honorable member for Corangamite (Mr. Crouch) on behalf of the growers in the Great Western district will be considered. Provision is made for the licensing of persons who desire to receive and store wine for export. This will enable a merchant who is not a wine-maker, and who has built up an export trade, to prepare and bottle wine, which is subject to excise duty, and ship it overseas. This will be a considerable convenience to those who intend to bottle wine for shipment to Canada. Since the Canadian treaty, a trade in bottled wines with Canada has opened up, aud there is every indication that it will assume very large proportions.

Mr Marks - It is about time, too.

Mr FORDE - As the honorable member knows, there has always been a dearth of Australian wines in Canada. The consumers there have been accustomed to drinking the best French wines, but soon they will be able to obtain Australian champagne.

In providing for the payment of duty on wine delivered for home consumption, it is intended that all duty shall accrue at the winery. Payments will be made weekly or monthly, as may be prescribed. The wine-maker will have to keep certain books, which will reveal details of all the wine sent out of the winery, and a penalty of £500 is provided for, should there be any irregularity in the removal of wine from the winery. At the moment there are large stocks of wine containing spirit on which excise duty has been paid. A quantity of this will be used for home consumption, and a quantity will be blended with newer wines. It is intended flint duty will not be again levied on these wines, and provision is made in the bill that if any of it is blended with wines subject to the wine excise duty, a refund will be made. Entries will be required when wine is removed, but an exception is made where a wine-maker wishes to transfer wine from one winery to another when they are both owned by him, also when a wine-maker wishes to transfer wine from his winery to his distillery or his vinegar factory. In order to simplify the procedure in these instances, provision is made so that these transactions may take place under permit.

This bill gives to officers certain powers which are necessary to carry out efficiently the provisions contained in the bill, and to protect properly the revenue. Officers will have access to the premises of persons licensed under the proposed act, and to the books kept by them. They will have power to enter and search premises where there is cause to suspect illicit practices are being carried on. On reasonable suspicion-, they may stop and search vehicles or boats suspected of carrying wine upon which duty has not been paid. They may also seize and secure any wine which they have reason to believe is forfeited.

In changing the incidence of taxation on wine, this bill has an important bearing on the wine industry. Previously wine-makers were much hampered in their operations on account of the restrictions necessary to protect the revenue when fortified wine was manufactured in bond. The part of the winery where this was done had to be kept under lock. Every vat containing this wine had to be securely locked, and nothing could be done excepting in the presence of an officer. An excise duty on wine will give the winemaker absolute freedom in making and preparing wine for home consumption There will be no bonds or locks, the obligation of the wine-maker being the payment of duty on all the wine which it delivered for home consumption, and also properly accounting for the wine which is delivered for any other purpose. There will be no necessity for the presence of an officer when wine is delivered, but the department will be safeguarded by the entries in the wine-makers' books. The provision for duty to be paid weekly will suit the convenience of the wine-maker. Of course, the department will see tha: in this respect all transactions are sufficiently covered by a substantial security.

Before proceeding with preparation of the proposals contained in this bill, the views of representatives of the different interests of those engaged in the wine industry were obtained. In every instance the proposals have been approved, and wine-makers will find that the provision of this bill are of the simplest kind, there being no unnecessary interference with the main essentials of their industry

Mr Latham - Have the growers approved of the provisions requiring the registration of persons who produce grapes for wine-making?

Mr FORDE - I have received no objection to the bill from grape-growers It is usual in Queensland for sugnrgrowers to register their names, and all tobacco-growers throughout the Commonwealth are required to do so. Similarly, gold-producers who benefit under the Gold Bounty Act are called upon to register, and every grape-grower who will benefit from a fixed price should have no objection to the practice; it will involve them in no expense. The wine industry is of great importance to Australia, and, with its far-reaching ramifications, the

Government would be loth to take any action that would prove injurious to the industry. I am taking this bill to the second-reading stage so that copies of it may be distributed among those concerned in the industry.

Mr Marks - Do they know anything about it?

Mr FORDE - The wine-makers know that the bill is under consideration. Deputations representing them have waited on me. They are aware of the report presented by the Hon. John Gunn, and our chief excise officer, Mr. Gollan, to whom they made their representations. The honorable member for Corangamite (Mr. Crouch) introduced a deputation a week ago from the wine-makers of the Western District of Victoria. The industry is familiar with the general principles of the bill, but not with the details, and I am submitting the second reading of the measure in order that the details may be placed before the wine congress, which assembles in Melbourne next Wednesday to consider the bill.

Mr Hawker - Does the Minister expect to pass it through all stages next week?

Mr FORDE - It is doubtful if that can be done. There is no extreme urgency in the matter. This measure will make very little difference to the revenue, although it will mean a slight increase.

Mr Hawker - Some time will be required to enable those interested in the industry in parts of South Australia and Western Australia to consider the details of the measure. There would be hardly time for them to comment upon it if it were passed next week.

Mr FORDE - My present intention is not to push on with the bill next week if there is any desire to delay its passage so that the industry may have more time to express its opinion on it. The Government does not wish to rush through Parliament a bill that may dislocate trade in some way; I do not think this bill will do so; the broad principles of the measure meet with the general approval of the trade. The only point on which there will be a difference of opinion is the rate of duty to be charged. That matter is not dealt with in the bill; it merely provides the machinery for the collection of excise duty on wine on a flat rate basis instead of an excise duty on fortifying spirit. Dry wines are not fortified, and no excise is now paid on them.

Mr Gabb - Is there any intention to refuse registration to growers? I hope that the object is to prevent new growers from entering the industry.

Mr FORDE - There is no such intention at the present time. That matter will be considered when the bill reaches the committee stage. One of the difficulties of the industry is that there is over-production. The State Governments have assisted thousands of persons to produce grapes for wine-making purposes, and the provision of an export bounty to enable the surplus to be marketed was necessitated. I do not consider it wise to put additional areas under vines for the production of wines that we have been unable to sell.

Mr Gabb - I was wondering if the registration was intended to prevent further production.

Mr FORDE - No. I am prepared to listen to any arguments that may be advanced in committee; this is not a party measure.

Mr Jones - Was it not provided in the Wine Export Bounty Act that the bounty was not to be paid on wine made from grapes grown in vineyards planted after a specified date?

Mr FORDE - There was a provision to that effect, but in operation it was found almost impossible to police it. The effect of the hill will be to remove the necessity for drawback rebates or remissions, because all wine for export will be delivered free of duty.

Mr Paterson - Then the Minister must have spoken under a misapprehension when he said a few moments ago, in answer to my interjection, that excise would be collected on all wine, regardless of whether it was exported or not.

Mr FORDE - I must have misunderstood the honorable member. I can assure him that the standard of wine-making will be raised, because, in the past, the use of fortifying spirit has been restricted on account of the high duty. The use of spirit is necessary in the manufacture of high-class sweet wine of such types as port or muscat, and wine-makers, on account of the abolition of the duty on fortifying spirit, will be in a position to use the proper quantity of spirit required to make a first quality wine. In this way it is considered that the industry will receive substantial benefit. There is a tendency to-day to avoid using fortifying spirit, or to use as little of it as possible, and to employ substitutes such as concentrated must. This has led to a cheap class of wine, commonly known as "pinkie", being put on the market in order to avoid paying revenue charges to the Commonwealth. When there is a flat rate of duty at so much per gallon, it will apply to all wines, and there will "be no inducement to put a cheap and inferior wine on the market in order to avoid the excise duty.

Mr Jones - Will this provision affect both dry and sweet wines?

Mr FORDE - Those details can be considered in connexion with the tariff schedule. At the present time there is no excise duty on champagne, chablis, claret, sautcrne and porphrey, because there is no fortifying spirit in it.

Mr Latham - Light wines are free, too.

Mr FORDE - Yes.

Mr Latham - If a duty is placed on them, it will inevitably increase the cost of light wines as compared with the heavier types.

Mr FORDE - Yes. Chablis is a popular light wine in which no fortifying spirit is used. It is largely produced in the Hunter River districts of New South Wales, and in the Great Western district of Victoria, and the imposition of a heavy duty per gallon on chablis, which is sold at as low as1s. 6d., and up to 4s. 6d. a bottle, would increase the price substantially. It has been pointed out to me by the growers in the Hunter River district, and in the Great Western district of Victoria, that the light dry wines cannot carry the same excise duty as, for example, sweet port, muscat and champagne. It has been represented that that difficulty might be overcome by exempting all dry wines with alcoholic content of 22 degrees and under, or by placing a very low rate of excise duty upon them, and applying to dry wines of an alcoholic content of from 28 to 28 the same flat rate of duty as will be applied to sweet wines. Those are matters that will be taken into consideration before the excise schedule is brought down.

I hope that the wine industry will obtain copies of this measure and express opinions upon it. Sympathetic consideration will be given to any representations that may be made by the wine congress that is to sit in Melbourne next week, or by any individual wine-maker, because the desire of the Government is to improve the wine industry, not to dislocate the trade.

Debate (on motion by Mr. Paterson) adjourned.

Suggest corrections