New UK tax hike puts a cork in free trade deal for local winemakers
A new British tax slug on wine could force SA growers out of the huge market – despite a free-trade agreement that will soon come into force.
SA Business
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A new British tax slug on wine could force South Australian vineyards to pull out of the huge market, despite a historic free trade deal that was finally approved by the UK parliament.
The duty on wine sold in Britain will increase with inflation by 10.1 per cent in August, at the same time the UK’s new controversial alcohol duty regime comes into force.
It means Australian wine will be hit with a 20 per cent tax hike in one fell swoop, raising the ire of local growers who say the UK market is now less attractive even with a free-trade agreement that will soon come into force and wipe out $43m in wine export tariffs nationally each year.
Australian Grape and Wine chief executive Lee McLean said the trade deal would make it easier to do business in the UK, but sounded the alarm over the domestic tax changes.
“There’s no doubt that, for some businesses, it will make the UK potentially a less attractive market for exports, which is not what we want when we are looking to diversify our exports,” Mr McLean said.
“I’m sure there will be a number of businesses … thinking about whether the UK is the market they want to be exporting to.”
On Friday (Australia time), the British parliament approved a free trade deal with Australia, removing tariffs on more than 99 per cent of all exports to the UK, worth $9.2bn a year.
It will completely remove tariffs of up to 20 pence a bottle on Australian wine, eliminating about $43m in tax per year. SA exports up to $238m in wine to the UK each year.
There are concerns the trade benefits will be dwarfed by the UK’s new streamlined alcohol tax system that will levy drinks by strength.
It’s estimated Australian reds, which are naturally stronger than British wines, would disproportionately increase by up to 70 pence a bottle.
SA Wine Industry Association chief executive Brian Smedley said: “The (tax) increases are likely to impact demand for wine, affecting producers of still wine and future export sales and opportunities”.
It’s understood Trade Minister Don Farrell has challenged the UK government on the controversial policy several times.
Senator Farrell, who privately hosted his then-UK counterpart Anne-Marie Trevelyan at his Clare Valley vineyard last September, lauded Britain’s long-awaited approval of the free trade deal as a “major win for South Australian agricultural exporters”.
“This trade agreement will remove unnecessary barriers to trade between our two countries which will open up new markets for our world-class goods and services, so that producers can export more and consumers can benefit from more choice and lower prices,” he said.
Senator Farrell said the free trade deal would be implemented “as soon as possible”.
“It’s a great deal that will benefit all Australians, and we want Australian exporters, businesses, workers and consumers to reap the opportunities and benefits of more open trade with the United Kingdom.”
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