Samui Wining & Dining
Taxing Times

Is the tax man setting his sights on our wine?

 

26Tax is one of life’s certainties, and here in Thailand we have no choice but to live with exorbitantly high taxation levied on our cherished imported wine. Unfortunately, for those of you who live elsewhere without too much wine taxation, many other governments are waking up to the fact there are huge revenues waiting to be harvested from the increased popularity of wine. And it’s worth remembering that in most countries wine is subjected to a double whammy of taxation. The two major types are, first “specific excise taxes” (levied on the quantity of a beverage) and second “ad valorem excise taxes” (levied on the price of a beverage). And it’s been predicted that legislation and taxation are likely to follow an upward curve globally, as the legislators and health lobbies continue to squeeze the wine trade, in both mature and developing wine markets.

      Somewhat cynically, the negative health issues regarding alcohol may well be used as a useful cover for heavy penalties. And parallels with the tobacco industry are hard to ignore, where punitive measures including draconian price hikes, hard hitting visual health warnings and bans on both advertising and visibility on shelves, have impacted an industry that sells a similarly legal and intoxicating product. Despite the fact that wine is probably the least

unhealthy of all alcoholic beverages, I don’t think it is too far-fetched to make the comparison. Tobacco used to be a glamorous business, remember those classy Benson & Hedges commercials in the cinemas during the late 70s? And those, now long gone, quaint and aromatic tobacconists in the high street? Health organizations, like WHO, may well be now setting their sights on alcohol in the not too distant future. The UK government unsuccessfully tried to bring in punitive laws to prohibit cheap alcohol sales in 2011 (although they did not specifically single out wine).

      Meanwhile in sunnier France, wine is part of the national identity and a valuable contributor to the economy, right? Or, is it an unwholesome commodity that’s a danger to public health? Amazingly, a new bill before the French senate claims the latter, calling for higher taxes on alcoholic beverages, stronger health warnings on labels and new restrictions on advertising and marketing (in France, of all places!). Not surprisingly, this proposal has angered the, usually self-satisfied, French wine growers. They have organized a lobbying campaign to fight back. “We will not accept being treated like drug dealers when wine is part of the same French gastronomic meal that was classified as an intangible heritage by UNESCO,” says an indignant Bernard Farges, president of the Bordeaux Wine Council.

      Nearly 500,000 people from the vineyards and wine trade are launching a national campaign to mobilize against this ethical and financial pressure. The new health bill, championed by the ANPAA (National Association for the Prevention of Alcoholism and Addiction), proposes a “behaviour tax,” which is allowed on a product considered dangerous for your health and is meant to deter consumption. The health bill also proposes changing the current government warning on labels for wine and other alcoholic beverages from “the abuse of alcohol is dangerous for health” to “alcohol is dangerous for your health”. The argument would seem to be consumption of alcohol is not an everyday necessity. There is no consumption without risk, and studies have shown that a substantial tax on a product diminishes consumption. A more sceptical person might argue that the French government is also very interested in increasing tax revenue, to help relieve ever-increasing national debt.

      Dr. Alain Rigaud, ANPAA president and a Reims based psychiatrist specializing in addiction, told Wine Spectator that the French were drinking less, and more specifically drinking less cheap wine, but that they still had a higher risk of liver disease than their European neighbours. “This is a public health problem. Wine and spirits are good for exports and jobs, but we don’t see the social cost.” Rigaud also said that the proposed behaviour tax would not deter Grand Cru drinkers, but would curtail the habits of bottom-shelf drinkers who reach for wine at five Euros a bottle or less. The presumption being that people are not drinking for the pleasure of tasting the wine, but merely for the effects of the alcohol. The proposed tax per bottle would be tied to its alcohol content. This, of course, is logical and further begs the question why wine cannot be taxed on alcohol content alone? Taxing wine this way could increase annual revenue and reduce alcohol consumption. And have the wonderful benefit of supporting fine wines in the medium to expensive price range.

     Put simply, why not equalize wine taxation? Instead of taxing wine by value, replace it with a system of taxing it according to its alcohol content, in the same way that beer and spirits are taxed (Thai Customs and Revenue Department please note). Indeed some wineries, including Treasury Wine Estates (which owns Penfolds and Wolf Blass), and Pernod Ricard (which owns Jacob’s Creek) have often called for wine to be taxed purely on alcohol content. Australian senator Di Natale has recently admitted that the current system, under which wine is taxed on value, encouraged the production of high volume, low quality products, which had harmed Australia's international reputation. Understandably, the Winemakers’ Federation of Australia does not support any tax increases, because it would harm the industry and would not be effective in reducing alcohol abuse. A tax increase would merely penalise the vast majority of responsible drinkers. And there is evidence that risky drinkers (rather like heavy smokers) were not sensitive to price rises anyway.

      For the average wine lover (as opposed to “wino”), what we really want to see is the collective wine trade waking up to this potentially devastating challenge coming from furtive and greedy tax legislators. And for moderation and common sense to prevail!

         

Peter James


 


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