Having followed the recent arguments put forward by the Winemakers’ Federation of Australian in support of Wine Equalisation Tax rebate scheme, I wonder just how stupid the WFA really thinks the rest of Australia is?
Reading the articles, I struggle to keep my fury at the total lack of honesty by the WFA in check. No other wine producing country in the world operates such a ridiculous regime for the taxation of wine as the scheme that currently operates in Australia. It is the complete disdain for consumers that really makes my blood boil. Quite simply, the WET regime means that the price of wines are ridiculously overpriced in Australia compared to more civilised countries such as France, Germany, Hong Kong, England, US and even our poor cousins to the east, New Zealand and yet the WFA continues to bleat how poorly done by they are. At present one can fly to Auckland NZ, pick up six expensive Australian wines and fly back to Australia for less than the price of the same wines in Australia.
The recent mindless attack on the extension of the WET rebate to NZ winemakers highlights just how farcical the WET regime is. NZ has build a global reputation for the production of high quality wines without the need to rely on such a ludicrous regime as WET. In Australia on the other hand, the WFA argues that if the WET rebate was removed numerous poor winemakers would go out of business so on that basis Australian wine consumers should continue to pay an additional 29% on wholesale in order to support these pitiful poor souls. Good, give me a break. Does Tim Kirk at Clonakilla rely on WET to survive, of course not! The only winemakers who rely on WET to survive are those winemakers who produce rubbish and should be put out their misery for producing such poor wines that the general public won't buy them at a price that supports the continued existence of that winemaker.
Perhaps when the day arrives that Australia finally has the balls to abolish WET in the same manner than America abolished slavery and South Africa abolished apartheid, the Australian wine industry will undergo a paradigm shift that will eliminate under performing producers and the quality of the Australia wine will take another quantum leap forward.
I will leave fellow forumites to shake their heads over the disingenuous comments in the articles below such as the tax on a $50 bottle of wine is $1, say what!!
http://www.afr.com/business/wine-makers ... 330-1maw2p
http://www.news.com.au/finance/small-bu ... 7219430090
Just how stupid does the WFA think Australia is?
Re: Just how stupid does the WFA think Australia is?
Coincidentally, the Senate is holding an inquiry into the wine industry and if you have the time, you could make a submission from a consumer's perspective, which would be covered by item j in the Terms of Reference. I will be doing so. A submission does not need to be any specific format or length. I agree totally with your comments about the WFA and it is about time consumers made their voice heard against these brigands.
http://www.aph.gov.au/Parliamentary_Bus ... _Reference
http://www.aph.gov.au/Parliamentary_Bus ... _Reference
Re: Just how stupid does the WFA think Australia is?
I'm not quite sure whether you're upset with the WET itself, or the application of the WET rebate, which is a whole other animal.
And the article doesn't claim $1 tax on a $50 bottle, it's comparing the tax per std drink. Assuming 8.0 std drinks, they're claiming about $8 of tax in a $50 bottle.
I assume that's excluding GST, obviously.
They are at least right about the stupidity of the way the current system operates; and the ginger beer example is a good example.
Assuming alcohol has to be taxed, then I think it only logical that the tax applies to the alcohol (ie. strength). That fact that wine gets hit by value I think is unreasonable.
I don't see why you should pay twice as much "sin tax" on a $30 bottle as a $15 one, when they're both 13%.
GG
And the article doesn't claim $1 tax on a $50 bottle, it's comparing the tax per std drink. Assuming 8.0 std drinks, they're claiming about $8 of tax in a $50 bottle.
I assume that's excluding GST, obviously.
They are at least right about the stupidity of the way the current system operates; and the ginger beer example is a good example.
Assuming alcohol has to be taxed, then I think it only logical that the tax applies to the alcohol (ie. strength). That fact that wine gets hit by value I think is unreasonable.
I don't see why you should pay twice as much "sin tax" on a $30 bottle as a $15 one, when they're both 13%.
GG
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Duncan Disorderly
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Re: Just how stupid does the WFA think Australia is?
rooman wrote:Having followed the recent arguments put forward by the Winemakers’ Federation of Australian in support of Wine Equalisation Tax rebate scheme, I wonder just how stupid the WFA really thinks the rest of Australia is?
...In Australia on the other hand, the WFA argues that if the WET rebate was removed numerous poor winemakers would go out of business so on that basis Australian wine consumers should continue to pay an additional 29% on wholesale in order to support these pitiful poor souls. Good, give me a break. Does Tim Kirk at Clonakilla rely on WET to survive, of course not! The only winemakers who rely on WET to survive are those winemakers who produce rubbish and should be put out their misery for producing such poor wines that the general public won't buy them at a price that supports the continued existence of that winemaker.
Perhaps when the day arrives that Australia finally has the balls to abolish WET in the same manner than America abolished slavery and South Africa abolished apartheid, the Australian wine industry will undergo a paradigm shift that will eliminate under performing producers and the quality of the Australia wine will take another quantum leap forward.
I have paraphrased your comments Rooman but you seem to be confusing the rebate small winemakers get from the WET, with the WET itself.
Immediately prior to the GST, wine was subject to a wholesale sales tax of 41 per cent. The wholesale sales tax on wine was ‘replaced’ by the GST, but, the 10 per cent GST being much less than the WST, the new WET, at 29 per cent, was introduced to make up the difference; to ensure that the retail price of wine, and most importantly taxation receipts, did not fall. Hence ‘equalisation’.
The WET may make wine here more expensive but it is truly not a protectionist tax. It is true that small winemakers get a rebate for sales up to a certain $ amount, but whether you abolish that or not the WET remains.
Cheers
DD
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Inside trader
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Re: Just how stupid does the WFA think Australia is?
Be careful what you wish for.
Let us take, as an example, the successful small producer, whose turnover is below the WET rebate ceiling, who produces quality wines and makes a profit. For such a producer the WET is simply two numbers on the quarterly BAS statement; a payment in one box and a matching rebate in the other. For such a producer the WET is really more of a tax concept than a tax. The WET is neither a cost to his business nor an element of his pricing.
What happens if the WET rebate is abolished? WET then becomes a cost. Making the reasonable assumption that he wishes to maintain his profitability then he will raise his prices to cover the cost of WET. If he continues to sell his wines at a higher price then he will maintain his profitability but the consumer will be paying more for his wines. If he fails to sell his wines at a higher price then we lose a quality producer. Neither outcome looks particularly attractive.
What happens if the WET is replaced by a different tax for which the small producer does not receive a rebate? The outcome of this scenario is exactly the same as that above. The producer will raise his prices by the amount of the tax to maintain his profitability and the possible outcomes will be as above.
WET or alcohol duty taxes are taxes designed to be paid by the consumer. They are a tax on the consumption of alcoholic beverages, not on the production of alcoholic beverages. WET, with or without the producer rebate, is not a scheme to prop up inefficient or poor quality producers. It may be a long bow to draw for some but it could be argued that the effect of the WET rebate is to benefit consumers!
Let us take, as an example, the successful small producer, whose turnover is below the WET rebate ceiling, who produces quality wines and makes a profit. For such a producer the WET is simply two numbers on the quarterly BAS statement; a payment in one box and a matching rebate in the other. For such a producer the WET is really more of a tax concept than a tax. The WET is neither a cost to his business nor an element of his pricing.
What happens if the WET rebate is abolished? WET then becomes a cost. Making the reasonable assumption that he wishes to maintain his profitability then he will raise his prices to cover the cost of WET. If he continues to sell his wines at a higher price then he will maintain his profitability but the consumer will be paying more for his wines. If he fails to sell his wines at a higher price then we lose a quality producer. Neither outcome looks particularly attractive.
What happens if the WET is replaced by a different tax for which the small producer does not receive a rebate? The outcome of this scenario is exactly the same as that above. The producer will raise his prices by the amount of the tax to maintain his profitability and the possible outcomes will be as above.
WET or alcohol duty taxes are taxes designed to be paid by the consumer. They are a tax on the consumption of alcoholic beverages, not on the production of alcoholic beverages. WET, with or without the producer rebate, is not a scheme to prop up inefficient or poor quality producers. It may be a long bow to draw for some but it could be argued that the effect of the WET rebate is to benefit consumers!
Re: Just how stupid does the WFA think Australia is?
I think the point on WET is: why is wine taxed at 10% GST + the 29% WET when other daily essentials such as bread or milk are tax free??? 
But in seriousness, why should wine be taxed at a higher rate than ordinary groceries subject to the GST?
The only logic I can see if that, similar to cigarettes, the government wishes to discourage consumption of a "social evil" i.e. alcohol.
In that case, I fail to see the rationale behind a progressive value-based tax.
Some might perhaps say that this is because rich people can afford more and hence a flat volume-based tax would not stop them from over-consuming the social evil. I think this is a difficult line of argument anyway because 1) we might surmise wealthier, employed demographics are less likely to cause the type of social ills being targeted and more likely to have private health insurance to cover the medical costs attributed to the social evil (this is clearly a generalisation); and 2) it is more likely that such consumers will maintain their consumption of the product, but simply trade down to a cheaper brand, as brand loyalty is much lower in alcohol and the breadth of pricing much broader than cigarettes for example.
I might add wealthier consumers are already paying the bulk of the tax collected by the overall progressive income tax system ...
The other problem with the value-based tax is that the cost to produce a unit of alcohol is very low. If the cost per drink in wine, for example, can be brought down to say $2/bottle for goon-equivalent, then the tax, while large in percentage terms, can be made relatively small in $ terms.
Thus meaning that those who wish to over-consume will be able to and the tax will do little if anything to stop them.
While I am not endorsing this model, per se, I would note in Singapore they charge a base tax of roughly S$70/litre of ethanol content which equates to about S$7-8/bottle of wine, depending on strength. This means the floor price for a bottle of wine in Singapore is about S$30/bottle, even in the cheapest supermarkets. However, "expensive" wine ($50-70/bottle in Aus) is relatively cheap as compared to Australia, as the tax does not proportionally increase.
But in seriousness, why should wine be taxed at a higher rate than ordinary groceries subject to the GST?
The only logic I can see if that, similar to cigarettes, the government wishes to discourage consumption of a "social evil" i.e. alcohol.
In that case, I fail to see the rationale behind a progressive value-based tax.
Some might perhaps say that this is because rich people can afford more and hence a flat volume-based tax would not stop them from over-consuming the social evil. I think this is a difficult line of argument anyway because 1) we might surmise wealthier, employed demographics are less likely to cause the type of social ills being targeted and more likely to have private health insurance to cover the medical costs attributed to the social evil (this is clearly a generalisation); and 2) it is more likely that such consumers will maintain their consumption of the product, but simply trade down to a cheaper brand, as brand loyalty is much lower in alcohol and the breadth of pricing much broader than cigarettes for example.
I might add wealthier consumers are already paying the bulk of the tax collected by the overall progressive income tax system ...
The other problem with the value-based tax is that the cost to produce a unit of alcohol is very low. If the cost per drink in wine, for example, can be brought down to say $2/bottle for goon-equivalent, then the tax, while large in percentage terms, can be made relatively small in $ terms.
Thus meaning that those who wish to over-consume will be able to and the tax will do little if anything to stop them.
While I am not endorsing this model, per se, I would note in Singapore they charge a base tax of roughly S$70/litre of ethanol content which equates to about S$7-8/bottle of wine, depending on strength. This means the floor price for a bottle of wine in Singapore is about S$30/bottle, even in the cheapest supermarkets. However, "expensive" wine ($50-70/bottle in Aus) is relatively cheap as compared to Australia, as the tax does not proportionally increase.
------------------------------------
Sam
Sam
Re: Just how stupid does the WFA think Australia is?
Inside trader wrote:Be careful what you wish for.
Let us take, as an example, the successful small producer, whose turnover is below the WET rebate ceiling, who produces quality wines and makes a profit. For such a producer the WET is simply two numbers on the quarterly BAS statement; a payment in one box and a matching rebate in the other. For such a producer the WET is really more of a tax concept than a tax. The WET is neither a cost to his business nor an element of his pricing.
What happens if the WET rebate is abolished? WET then becomes a cost. Making the reasonable assumption that he wishes to maintain his profitability then he will raise his prices to cover the cost of WET. If he continues to sell his wines at a higher price then he will maintain his profitability but the consumer will be paying more for his wines. If he fails to sell his wines at a higher price then we lose a quality producer. Neither outcome looks particularly attractive.
What happens if the WET is replaced by a different tax for which the small producer does not receive a rebate? The outcome of this scenario is exactly the same as that above. The producer will raise his prices by the amount of the tax to maintain his profitability and the possible outcomes will be as above.
WET or alcohol duty taxes are taxes designed to be paid by the consumer. They are a tax on the consumption of alcoholic beverages, not on the production of alcoholic beverages. WET, with or without the producer rebate, is not a scheme to prop up inefficient or poor quality producers. It may be a long bow to draw for some but it could be argued that the effect of the WET rebate is to benefit consumers!
First thing is addressing WET..forget about the rebate for now...WET.
If you have a sin tax, you tax the SIN not the persons ability to pay for the sin. What is the real logic behind WET? To discourage over consumption of alcohol and maybe pay for government services that are necessary because of that over consumption.
Based on the amount of money the government collects, you can have a tax based on content of alcohol and come out at or above the current rate.(I did this calculation in another thread) It would mean cheap bottles would be taxed slightly more and more expensive bottles would be taxed a lot less. You might say, isn't that regressive? Yes it is..but if you're creating a tax to discourage a sin, you tax the sin. Tobacco in Australia is done that way...why isn't alcohol?
You solve that problem, the rebate is no longer even a factor because the taxes on a bottle of wine is low enough to where prices for the boutique producers would actually FALL and their margins would INCREASE (that sounds like win win to me). Sure other large competitor's prices might fall even more but if these producers are making quality wine, that won't matter..
But lets say they don't change it...
Producers that can not survive without WET rebates shouldn't be in business. If they go out of business, someone that CAN compete without WET rebates will come and take their place. Vineyards, if they get sold, will get sold at a lower cost basis because people are going out of business...That will improve their ability to compete overseas as well. GREAT wine will always sell..let the market determine that not the government. The rebates exist for both good and BAD producers of wine and I'd argue it supports more bad producers than good.
Re: Just how stupid does the WFA think Australia is?
sjw_11 wrote:I think the point on WET is: why is wine taxed at 10% GST + the 29% WET when other daily essentials such as bread or milk are tax free???
But in seriousness, why should wine be taxed at a higher rate than ordinary groceries subject to the GST?
The only logic I can see if that, similar to cigarettes, the government wishes to discourage consumption of a "social evil" i.e. alcohol.
In that case, I fail to see the rationale behind a progressive value-based tax.
Some might perhaps say that this is because rich people can afford more and hence a flat volume-based tax would not stop them from over-consuming the social evil. I think this is a difficult line of argument anyway because 1) we might surmise wealthier, employed demographics are less likely to cause the type of social ills being targeted and more likely to have private health insurance to cover the medical costs attributed to the social evil (this is clearly a generalisation); and 2) it is more likely that such consumers will maintain their consumption of the product, but simply trade down to a cheaper brand, as brand loyalty is much lower in alcohol and the breadth of pricing much broader than cigarettes for example.
I might add wealthier consumers are already paying the bulk of the tax collected by the overall progressive income tax system ...
The other problem with the value-based tax is that the cost to produce a unit of alcohol is very low. If the cost per drink in wine, for example, can be brought down to say $2/bottle for goon-equivalent, then the tax, while large in percentage terms, can be made relatively small in $ terms.
Thus meaning that those who wish to over-consume will be able to and the tax will do little if anything to stop them.
While I am not endorsing this model, per se, I would note in Singapore they charge a base tax of roughly S$70/litre of ethanol content which equates to about S$7-8/bottle of wine, depending on strength. This means the floor price for a bottle of wine in Singapore is about S$30/bottle, even in the cheapest supermarkets. However, "expensive" wine ($50-70/bottle in Aus) is relatively cheap as compared to Australia, as the tax does not proportionally increase.
Sam
You have succinctly summed up my fury towards WET and by extension its bastard offspring the WET rebate. WET is in short a festering boil on the face of the Australian domestic wine market. If we had politicians, from either side of the political spectrum, with the balls to lance this toxic boil, I would dance a merry jig naked on the front lawn of Parliament House in Canberra.
Quite simply the quid pro quo for introducing GST in Australia was the repeal of ad hoc taxes such as the wholesale tax on wine. The scheme and purpose behind the introduction of GST precluded the creation of new devil spawn such as WET. In short there are no justifiable grounds for the creation of a value based tax such as WET to be imposed on domestic Australian wine consumers. If one believes there are social objectives that can be achieved by increasing the price of wine such as moderating alcoholism etc etc etc then a tax based on volume or alcohol strength might make sense. But there are no social, moral or political grounds for maintaining a value based tax on wine.
Mark
Re: Just how stupid does the WFA think Australia is?
The WFA is supporting the WET rebate for smaller producers. They didn't introduce the WET , rather the Liberal Government when the GST was introduced and the WET was added on to wine so the govt. didn't lose money. The WET rebate, when introduced for smaller producers, meant these producers could lower their prices because, as pointed out in an earlier email, the same amount is put in the left hand and right hand columns of the BAS. If the rebate is done away with, either prices will go up or small producers will have to absorb it and have less margin. Smaller producers, focussing on quality, have much higher production costs, so the removal of the rebate would affect them. Fury towards WFA is un-justified.
Re: Just how stupid does the WFA think Australia is?
If you change WET so it is applied to alcohol rather than value (which is what a sin tax is supposed to do) then the rebate becomes a non factor because the price of the boutique makers wine would drop (end user price). They can then make up whatever rebate they have by raising the price (so the final price would be somewhere between where it is now and where it would be without WET).
But outside of that...what makes you think it is a good idea to subsidize a small winery? If they are making a quality product they WILL attract customers....If they can't compete, they shouldn't compete. Period. Them going out of business will open opportunities for other businesses by lowering their cost basis. This isn't even going into the many BAD wineries that benefit from WET...They produce total junk but make money purely because the WET rebate allows them to.
But outside of that...what makes you think it is a good idea to subsidize a small winery? If they are making a quality product they WILL attract customers....If they can't compete, they shouldn't compete. Period. Them going out of business will open opportunities for other businesses by lowering their cost basis. This isn't even going into the many BAD wineries that benefit from WET...They produce total junk but make money purely because the WET rebate allows them to.
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Inside trader
- Posts: 3
- Joined: Thu Apr 02, 2015 4:27 pm
Re: Just how stupid does the WFA think Australia is?
Polymer,
I don't think you are listening to what WineRick and I are telling you. I am talking about small producers whose turnover falls below the WET rebate ceiling (which is most of them). Under the present system small producers do not factor WET into their pricing as it is rebated. Any change to a volumetric system that is not rebated will result in higher prices or reduced margins for small producers. The quality producers are likely to raise their prices. None of the proposed scenarios of tax change are likely to result in quality small producers lowering their prices.
The producers who produce inferior wine will not find a market for their wine and will ultimately fail whatever the tax system, with or without a rebate.
The quality small producers who have a following and a market for their wines will likely succeed no matter what tax changes are introduced but there is very little likelihood of them selling their wine any cheaper as a result of any change to the tax system.
I don't think you are listening to what WineRick and I are telling you. I am talking about small producers whose turnover falls below the WET rebate ceiling (which is most of them). Under the present system small producers do not factor WET into their pricing as it is rebated. Any change to a volumetric system that is not rebated will result in higher prices or reduced margins for small producers. The quality producers are likely to raise their prices. None of the proposed scenarios of tax change are likely to result in quality small producers lowering their prices.
The producers who produce inferior wine will not find a market for their wine and will ultimately fail whatever the tax system, with or without a rebate.
The quality small producers who have a following and a market for their wines will likely succeed no matter what tax changes are introduced but there is very little likelihood of them selling their wine any cheaper as a result of any change to the tax system.
Re: Just how stupid does the WFA think Australia is?
Until someone can come up with a better system/plan (ie INCREASE net revenue from booze) then nothing is going to happen.
Regardless on whether people agree with WET, the fundamental issue for this government (and ALL future governments) is
to ensure there is enough revenue to meet the demands & expectations of the voting public (please note this is separate to
each parties 'election promises') and to ensure the government debt is manageable & sustainable.
Trouble is that the expense/cost of those demands & expectations are vastly outweighing the revenue people/companies are currently paying.
Right now we have an Australia wide cultural issue that no one wants to pay tax, or pay as little as legally (and in some cases illegally) possible. Whether this be via GST, Personal Tax, LCT, etc etc ect, at the end of the day, and for as long as i have been around, people have always complained they are paying too much tax. I dont think I have ever heard anyone say 'You know what... im paying the right amount of tax'
Yet everyone expects the government to foot the bill for paying for infrastructure/roads, schools, hospitals, NDIS ect etc and screams blue
murder the second their Family Tax Benefit is reduced or the NDIS is scrapped or the Foreign Aid budget is reduced.
Doesn't really make sense to me. If you want all these things....... its the citizens of that country that pay for them.
Regardless on whether people agree with WET, the fundamental issue for this government (and ALL future governments) is
to ensure there is enough revenue to meet the demands & expectations of the voting public (please note this is separate to
each parties 'election promises') and to ensure the government debt is manageable & sustainable.
Trouble is that the expense/cost of those demands & expectations are vastly outweighing the revenue people/companies are currently paying.
Right now we have an Australia wide cultural issue that no one wants to pay tax, or pay as little as legally (and in some cases illegally) possible. Whether this be via GST, Personal Tax, LCT, etc etc ect, at the end of the day, and for as long as i have been around, people have always complained they are paying too much tax. I dont think I have ever heard anyone say 'You know what... im paying the right amount of tax'
Yet everyone expects the government to foot the bill for paying for infrastructure/roads, schools, hospitals, NDIS ect etc and screams blue
murder the second their Family Tax Benefit is reduced or the NDIS is scrapped or the Foreign Aid budget is reduced.
Doesn't really make sense to me. If you want all these things....... its the citizens of that country that pay for them.
Re: Just how stupid does the WFA think Australia is?
I think what polymer is trying to say is why should a bottle of Grange attract more tax (other than GST) as a sin tax than a bottle of goon. The idea of a sin tax is to discourage consumption. Thus if the WET is removed, the rebate is no longer needed. Yes cheap wines will be more expensive but premium world class produce (what the industry should be striving for) will become more affordable. I can't imagine that this would decrease the tax takings by too much as the vast volume of sales will still be at the cheaper end of the price spectrum where the new tax is actually higher per bottle.
Cask wine will be the biggest loser as this will appreciate considerably with an alcohol content based tax but then the consumers of this product are exactly who you are targeting with a sin tax.
There is definitely a flaw in the system if your own produce can be bought cheaper over seas.
Cask wine will be the biggest loser as this will appreciate considerably with an alcohol content based tax but then the consumers of this product are exactly who you are targeting with a sin tax.
There is definitely a flaw in the system if your own produce can be bought cheaper over seas.
Re: Just how stupid does the WFA think Australia is?
Inside trader wrote:Polymer,
I don't think you are listening to what WineRick and I are telling you. I am talking about small producers whose turnover falls below the WET rebate ceiling (which is most of them). Under the present system small producers do not factor WET into their pricing as it is rebated. Any change to a volumetric system that is not rebated will result in higher prices or reduced margins for small producers. The quality producers are likely to raise their prices. None of the proposed scenarios of tax change are likely to result in quality small producers lowering their prices.
The producers who produce inferior wine will not find a market for their wine and will ultimately fail whatever the tax system, with or without a rebate.
The quality small producers who have a following and a market for their wines will likely succeed no matter what tax changes are introduced but there is very little likelihood of them selling their wine any cheaper as a result of any change to the tax system.
Of course I'm listening to what you're saying...
1. They do factor WET into their pricing as far as what to set it as retail. But, for example, their wholesale cost might at their "cost" knowing they'll get the WET rebate back or their wholesale might be lower than it would be without WET.
2. A change to how they calculate WET would indeed change this.
Here's an example..
60 dollar bottle of wine, which has approximately 15 dollars of WET added to it. If we use the calculation I had in another thread which showed how many liters of wine was sold and the revenue generated...we can safely say if they can set to approximately 1-2 dollars per bottle based on alcohol content. Here's that thread:
viewtopic.php?f=1&t=14447
So 60 dollar retail bottle (today) which is wholesale 23, LUC 38, after GST 43.
Change those numbers now to adjust for 2 dollars per bottle: Wholesale 23, LUC 25, after GST, 28. *1.4 = 39 dollars retail.
So lets work that backwards, say we target a 50 dollar Retail price under the "new" volume based WET scheme with no rebate.
50/1.4 = 35.7*.91 = 32.5 LUC - 2 dollars = 30.5 dollars is what the WINERY could charge. They could charge 6.5 more dollars PER BOTTLE and still sell it for 10 dollars LESS than what they charge now.
Let's look at the WET rebate.
On a case of 60 dollar wine they get 62.67 back per CASE. In this example they charged 6.5 more per bottle so 6.5*12 = 78 more per case and their retail price was 10 dollars LESS than it is today under the WET scheme.
Lets take a 30 dollar bottle retail today.
11.6 wholesale, 19.5 LUC, 21.4 after GST
That would be
11.6 Wholesale 13.6 LUC 15 after retail *1.4 = 21 dollars retail
So lets target 25 dollars as the "new" retail under the new proposed 2/bottle WET.
25/1.4 = 17.8 after GST * .91 = 16.25 LUC - 2 = 14.25 WHOLESALE. So this winery got 2.5 more dollars per bottle.
So lets include WET REBATE. 30 dollar retail bottle today, a case gets them 31.34 per CASE of wine. 2.5*12 = 30 dollars per CASE of wine. So the difference here to the winery is 1.34 under a "rebate" or subsidy scheme...but the retail price is 5 dollars LESS. How can they make that difference up? Make the retail 26 dollars or 27 dollars.
Obviously as we get lower and lower in price the 2 dollars per bottle becomes closer to what is being charged today...but as you said, these are boutique wineries with HIGH quality and ones we want to keep around so we're not playing in the lower end for these smaller producers. The only smaller producers making a living dealing in the low end are the ones we don't want.
So what is the net result of this for our high quality smaller producers.
Equal to or greater margin depending on how they price out the new retail...better prices for consumers.
You might say, well the big boys will now have a pricing advantage..sure...but that's normal right? Are the boutique wineries selling to the general public? Not too much...do people need to want to spend a bit more to get a higher quality more individual product? sure..that's how it always is...
So that's the picture under a volume based WET without Rebate scheme...it looks like WIN WIN to me.
But outside of that...There is no reason to subsidize the smaller producers..if they can't differentiate themselves from other producers and charge enough to run their business, they shouldn't be in business. A strong Australian wine industry is not built by carrying small producers that have a poor business model. Them going out of business will help make the rest of the industry stronger by improving their cost basis...or pushing for new, better sites or pushing for better care of the vines or new ideas or better wine making techniques....You shouldn't just get to do the same old stuff making mediocre wine and stay in business..that isn't what the industry needs..especially when there is a huge glut of low end plonk available...
Note: Some of the math might be off a bit as far as reversing gst but it doesn't end up being significant..I also rounded a few things here and there depending on what was easier..the point still remains though...
Last edited by Polymer on Thu Apr 09, 2015 4:00 pm, edited 1 time in total.
Re: Just how stupid does the WFA think Australia is?
vovo wrote:I think what polymer is trying to say is why should a bottle of Grange attract more tax (other than GST) as a sin tax than a bottle of goon. The idea of a sin tax is to discourage consumption. Thus if the WET is removed, the rebate is no longer needed. Yes cheap wines will be more expensive but premium world class produce (what the industry should be striving for) will become more affordable. I can't imagine that this would decrease the tax takings by too much as the vast volume of sales will still be at the cheaper end of the price spectrum where the new tax is actually higher per bottle.
Cask wine will be the biggest loser as this will appreciate considerably with an alcohol content based tax but then the consumers of this product are exactly who you are targeting with a sin tax.
There is definitely a flaw in the system if your own produce can be bought cheaper over seas.
They don't need to remove WET, just change how it is calculated. For example, 2 dollars per bottle (which would actually INCREASE revenue for the government by about 700 million dollars). 1-2 dollars per litre of alcohol (within a certain range) would be closer to what they get today (which is netting around 500 million).
The impact of this is:
Goon bags = will cost a bit more...I don't know how many liters are in a box..3 or something? So lets say 3-6 dollars more per box.
Cheap wine would cost slightly more. The break even is around 5 dollars a bottle. So if you buy sub 5 dollar per bottle of wine, you'll pay MORE per bottle slightly...If you buy greater than a 5 dollar bottle of wine you'll pay slightly less..the higher it goes, the difference becomes greater...but it depends on the per bottle WET. At 2 dollars/bottle that number is like a retail 8 dollar bottle.
More expensive wines get cheaper....
Sin taxes ARE regressive..of course they are..but if you're going to have a SIN tax..you tax the SIN. Having a nothing tax on a bottle of cheap wine isn't discouraging anyone from drinking and people aren't buying expensive bottles of wine to abuse alcohol...Tobacco is not done by value it is by volume.
And I'm not even talking about GST..which is still there..it still scales to the price of something...
Re: Just how stupid does the WFA think Australia is?
Perfect example of what should NOT be done.
If there is too much junk wine, why do we want to keep subsidizing the growers making junk grapes? And are they junk grapes? If they were great then they'd have sold for more...If the land can't produce great product, there isn't a reason to keep trying to grow there. If it can and it isn't, they're not doing enough with the land. Might be an effort thing, might be a skill thing...
Maybe the best thing is to sell the land to someone else..or try growing something else...If there is an oversupply, you either need to increase demand or some of the suppliers need to drop out of the market....you aren't fixing the glut by creating ways for people to rip off the system and add more glut because they get a subsidy. If you think that isn't possible, of course it is. For every possible deserving person of the subsidy there are others that have found a way to rip it off...
If there is too much junk wine, why do we want to keep subsidizing the growers making junk grapes? And are they junk grapes? If they were great then they'd have sold for more...If the land can't produce great product, there isn't a reason to keep trying to grow there. If it can and it isn't, they're not doing enough with the land. Might be an effort thing, might be a skill thing...
Maybe the best thing is to sell the land to someone else..or try growing something else...If there is an oversupply, you either need to increase demand or some of the suppliers need to drop out of the market....you aren't fixing the glut by creating ways for people to rip off the system and add more glut because they get a subsidy. If you think that isn't possible, of course it is. For every possible deserving person of the subsidy there are others that have found a way to rip it off...
Last edited by Polymer on Thu Apr 09, 2015 5:54 pm, edited 1 time in total.
Re: Just how stupid does the WFA think Australia is?
Polymer wrote:Perfect example of what should NOT be done.
If there is too much junk wine, why do we want to keep subsidizing the growers making junk grapes? And are they junk grapes? If they were great then they'd have sold for more...If the land can't produce great product, there isn't a reason to keep trying to grow there. If it can't and it isn't, they're not doing enough with the land. Might be an effort thing, might be a skill thing...
Maybe the best thing is to sell the land to someone else..or try growing something else...If there is an oversupply, you either need to increase demand or some of the suppliers need to drop out of the market....you aren't fixing the glut by creating ways for people to rip off the system and add more glut because they get a subsidy. If you think that isn't possible, of course it is. For every possible deserving person of the subsidy there are others that have found a way to rip it off...
Could not agree more!
Re: Just how stupid does the WFA think Australia is?
I wasn't planning to enter this thread, but the point I want to make about WET has not, to my surprise, been made.
There is a lot of dialogue here about the philosophy behind the WET. For my 2c - I highly doubt this was a philosophy driven tax - it was an opportunistic play by the government of the day to retain tax revenue by attempting to keep wine at the price it was before the introduction of the GST to replace sales taxes etc. Forget the notion of a sin tax and all the theoretical ways to apply it - its a government looking for money. That's all.
That Australia has one of the most highly taxed wine markets in the world is stupid and IMO wrong - but that's another story.
For disclosure - I am part owner of a micro - boutique sized New Zealand maker who ships small quantities of wine into Australia, pays WET and receives the rebate. Without the rebate, our wine - like many producers our size in both NZ and Australia - could only reach Australian shelves at uncompetitive prices.
There is a lot of dialogue here about the philosophy behind the WET. For my 2c - I highly doubt this was a philosophy driven tax - it was an opportunistic play by the government of the day to retain tax revenue by attempting to keep wine at the price it was before the introduction of the GST to replace sales taxes etc. Forget the notion of a sin tax and all the theoretical ways to apply it - its a government looking for money. That's all.
That Australia has one of the most highly taxed wine markets in the world is stupid and IMO wrong - but that's another story.
For disclosure - I am part owner of a micro - boutique sized New Zealand maker who ships small quantities of wine into Australia, pays WET and receives the rebate. Without the rebate, our wine - like many producers our size in both NZ and Australia - could only reach Australian shelves at uncompetitive prices.
Re: Just how stupid does the WFA think Australia is?
Polymer wrote:So 60 dollar retail bottle (today) which is wholesale 23, LUC 38, after GST 43.
None of these numbers make any sense to me.
Isn't the equation:
Wholesale price
+29% WET
= Cost into store
+ retail margin
+ 10% GST
= retail price
And yes, the WET was just a con-job to make sure the government lost no money as a result of the GST.
Since most of the volume was in bulk (cask) wine and cheap bottles, that's why the industry plumped for the %-of-value tax.
cheers,
GG
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Redwine&Rum
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Re: Just how stupid does the WFA think Australia is?
"For disclosure - I am part owner of a micro - boutique sized New Zealand maker who ships small quantities of wine into Australia, pays WET and receives the rebate. Without the rebate, our wine - like many producers our size in both NZ and Australia - could only reach Australian shelves at uncompetitive prices"
I guess what we are getting at here though is you would obviously do away with WET, and by extension the WEB rebate.
Then have a fairer/less compliated tax on wine, so that it is comparable with beer/spirits etc.
Then again, the taxation system in this country is crazy. And all these white papers on the taxation system to try and symplify it, haven't changed anything at all. GST was supposed to replace multiple state taxes, but never did.
I guess what we are getting at here though is you would obviously do away with WET, and by extension the WEB rebate.
Then have a fairer/less compliated tax on wine, so that it is comparable with beer/spirits etc.
Then again, the taxation system in this country is crazy. And all these white papers on the taxation system to try and symplify it, haven't changed anything at all. GST was supposed to replace multiple state taxes, but never did.
Re: Just how stupid does the WFA think Australia is?
GraemeG wrote:Polymer wrote:So 60 dollar retail bottle (today) which is wholesale 23, LUC 38, after GST 43.
None of these numbers make any sense to me.
Isn't the equation:
Wholesale price
+29% WET
= Cost into store
+ retail margin
+ 10% GST
= retail price
And yes, the WET was just a con-job to make sure the government lost no money as a result of the GST.
Since most of the volume was in bulk (cask) wine and cheap bottles, that's why the industry plumped for the %-of-value tax.
cheers,
GG
Sorry, I used the price they'd pay which includes GST...and then 40% on top of that. They then pay GST minus what they've already paid. Technically that nets the retailer a bit more than 40% but I think that is a pretty common calculation.
Wholesale is to the distributor. LUC = Wholesale price with WET to retailer. So wholesale *1.3 (30%)*1.29 (plus WET) = LUC.
LUC*1.1 = After GST (to retailer) *1.4 = Retail price.
Ultimately, you can change the % assumptions for wholesale and retail to come up with different figures..it really doesn't change the basic idea that a volume based WET would get these high quality boutique producers better margins on their wine and lower the retail price to consumers compared to prices today.
The lower end wine wouldn't..they'd have a higher price...they wouldn't get the huge benefit of WET...but all of the arguments about saving the little guy, the high quality producer, etc, etc...He benefits from changing WET..the real beneficiaries of WET and the rebate and the ones that lose out are the bulk JUNK wine producers...
Re: Just how stupid does the WFA think Australia is?
Best line from this, a quote from a grape grower:
Problem: "Mr Doupis [a Riverland wine grower] said growers needed to demand higher prices from wineries if they were to survive.
“We have to stop giving them our wine for near-nothing,’’ he said.
“Everyone else along the chain is making money and that’s why nothing’s happening.’’"
Solution: A new tax!
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Sam
Sam
