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Thursday, 25 August 1983
Page: 268

Mr HICKS(11.05) —It is impossible to believe the lack of understanding of the Government in its decision to introduce an excise tax on fortified wines. The decision is particularly worrying because it demonstrates that the Government simply has not done its homework. To be generous, the impact of this decision on the wine making industry and the wine grape growing industry is far greater than the Government was led to believe by its advisers. If this is not the case the action of the Government is callous in the extreme. The fact is that the Government has blatantly broken a very specific promise to the wine industry. Labor's election policy stated absolutely unequivocally that a Labor government would not impose a sales tax or an excise tax on wine. I wish to quote from the rural policy speech of the present Prime Minister (Mr Hawke) in Griffith on 20 February 1983. He said:

The wine industry is beset with problems. The industry is faced with the need to make bold decisions at a time of low profitability if the industry is to be in a position to meet the opportunities of the 1980s.

Labor has pledged not to impose a sales tax or an excise tax on wine. We will seek co-operation with the States to facilitate the establishment of grower regional councils. The Labor Government will examine the special problems faced by co-operative wineries and supplying growers.

The taxation disadvantages suffered by the wine makers with respect to stock holding will be objectively examined on the basis that wine making is a primary production process, not a manufacturing industry.

That promise has gone out the window and the ramifications are only just beginning. Let us just look at some of the facts the Government ignored in reaching this decision. Sales of fortified wines, as a percentage of total wine sales, have fallen from 53 per cent in 1967-68 to around 18 per cent in 1981-82. That is clear evidence of the difficulties facing this section of the industry. Those difficulties will be greatly exacerbated by the new tax. The tax will put between 70c and $1 on the cost of an average bottle of fortified wine. That will have a very considerable effect on demand, which will further aggravate industry problems. The Government has totally failed to understand that grape growing for fortified wines is very much a regionalised activity. Sixty eight per cent of the fortified wine grapes are grown in the South Australian Riverland and Barossa Valley areas and 21 per cent are grown in New South Wales, most of this being grown within the Murrumbidgee Irrigation Area.

Does the Government not understand that at least 20 per cent of the industry is engaged in the manufacture of fortified wines and that, because of the quantity of grapes required to make fortified wine as compared with unfortified wine, this 20 per cent of the industry affects 40 per cent of the wine grapes grown? One-fifth of the volume in fortified wine is spirit, which is to be excised. In the MIA there are wineries that depend to a major extent on the production of fortified wines. There is a real threat that some of the smaller wineries will not produce any of this wine this year because of the Government's new imposition.

Mr Katter —Why do they hate the little people?

Mr HICKS —That is right. Where does this leave the wine grape growers? It is no exaggeration to say that some of them will go to the wall. It is an extraordinary situation when a government that claims to be committed to increasing employment introduces a taxation measure that threatens the economic viability of entire regions, of individual farmers and of a large proportion of the wine making industry. Needless to say the decision is also shot full of holes. There is complete confusion in the industry because no one knows how the excise will be implemented. If the excise has to be paid within seven days of mixing the spirit with the wine this will have a disastrous effect and will place most wineries in an impossible financial position. A more equitable system would be to pay the excise when the wine is withdrawn from bond, if there is any justice in any excise at all being paid. Does the excise apply to fortified wines that are produced specifically for export? If so, why? Surely, if the Government is really interested in promoting Australian exports and in this case especially exports of fortified wine, all products for export must be exempt from this excise.

Because of all the confusion in the Government's announcement it is hard to get an overall accurate assessment of the cost to the wine making industry. Nonetheless it will be very substantial indeed. Initial calculations by individual wine makers to whom I have spoken vary up to $2.5m and $3m a year in additional costs. In total, the tax could cost the industry up to $15m a year. That is a massive additional cost for an industry already in serious economic difficulty. The industry was promised earlier that it would get a great deal of assistance.

Mr McGauran —Another broken promise.

Mr HICKS —That is right. One of the amazing things about the Government's decision is that it was made despite overwhelming contrary evidence provided by the industry and even by the Labor Government in South Australia. I was interested to hear the South Australian Premier, Mr Bannon, on Australian Broadcasting Corporation television yesterday, saying that an excise tax could cause greater problems than a sales tax and that he would certainly be taking the matter up. I am sure Mr Bannon will take up the matter. I also hope that the New South Wales and Victorian Premiers and their Ministers for agriculture will also take up the matter. I am sure the industry will take up the matter most forcefully, and I can assure the industry that it has my full support. I am sure it has the full support of the honourable member for Wakefield (Mr Andrew), the honourable member for Mallee (Mr Fisher), the honourable member for Indi (Mr Ewen Cameron) and all the members who are concerned with the Hunter Valley, although I believe that in the Hunter Valley fortified wines are not as important as they are in other areas. I am sure that those people will also take up this matter.

I can assure the industry that it has my full support in bringing every pressure to bear to force the Government to back down on this discriminatory decision and on its original election promise. On behalf of the wine grape growers and the wineries in the Riverina and in other parts of Australia I ask the Government to think this matter through carefully with a view to withdrawing this hastily conceived tax.