Tax dollars going Sideways: New Zealand wine makers taking the piss with ‘perverse’ rebate

A ‘PERVERSE’ arrangement which sees millions of Australian taxpayer dollars funnelled to New Zealand wine producers every year looks set to be abolished.

Kiwis taking the piss with your tax

A ‘PERVERSE’ arrangement which sees millions of Australian taxpayer dollars funnelled to New Zealand wine producers every year looks set to be abolished.

Wine and alcohol industry groups have joined with government backbenchers in calling on the loophole in the Wine Equalisation Tax rebate scheme to be closed in the upcoming review of Australia’s tax system.

The New Zealand rebate scheme was introduced in 2005 under the Howard government. Under the rebate scheme, Australian taxpayers “refunded” New Zealand wine makers to the tune of $25 million in the last financial year, up around 10 per cent on the $23 million paid in 2012-13.

The rebate, which is extended to New Zealand in accordance with the Australia and New Zealand Closer Economic Relations Trade Agreement of 1983, has been labelled “perverse” and “absurd”.

Winemakers’ Federation of Australia chief executive Paul Evans has been meeting with government MPs this week to put the case for ending the rebate on the basis that it hurts Australian wine producers, with Australian taxpayers effectively “paying the competition to come in and flood the market”.

Thirty per cent of the top 20 wines in Australia are New Zealand brands.

“The original intention of the rebate was to support small- and medium-sized wineries. We believe the creation of the New Zealand scheme as part of our bilateral trading arrangements was perverse,” he said.

“Because they have a separate rebate scheme they enjoy a distinct commercial advantage over local producers, which is an absurd outcome in a market of oversupply.”

South Australian Liberal backbencher Tony Pasin, who represents more wine makers and grape growers than any other MP, has been lobbying the government to end the Kiwi subsidy.

While the New Zealand wine producers get the rebate, they don’t pay the tax in the first instance, and as such, it’s not a rebate but a subsidy, he argues.

Mr Pasin said he had raised the issue with Prime Minister Tony Abbott directly, who acknowledged the “inherent unfairness” of the scheme.

“This just doesn’t pass the pub test,” he said. “It’s certainly unfair, and the response I’ve had from our friends in New Zealand is, ‘Well, it might be unfair but you can’t stop us doing this because to amend the WET would be a breach of your trading obligations.’”

However, the government has been provided with legal advice on how the New Zealand rebate scheme can be unwound. Mr Pasin met with Assistant Treasurer Josh Frydenberg on Thursday following meetings with the WFA earlier in the week.

The Distilled Spirits Industry Council of Australia and the WFA are both preparing submissions on the issue to the government’s Tax Reform White Paper.

However, the DSICA wants the entire WET rebate — which saw Australian taxpayers refund $308 million to wine makers in 2013-14 — to be scrapped. The WFA is only calling for the separate New Zealand subsidy scheme to be ended.

“If the Australian government wants to continue supporting small regional wineries, there should be more transparent and targeted methods used, rather than using a tax refund system that is available to all wine makers and which distorts the wine industry,” said Stephen Riden, manager of information and research at the DSICA.

“This would end the money flowing to foreign wineries and the rorting of the rebates.”

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