WET Rebates and other credits amounted to $270M in 2013/14 according to the ATO. Some of those from within industry, who oppose the reforms, have put the question, “How can you justify to government the proposal to withdraw such a substantial subsidy from regional producers on an annual basis”?
Firstly, that question is misleading inasmuch as the industry position, as put to the Federal Government is not to “rip the rug out” but rather to phase out the rebate on bulk and unbranded product over the coming four years, thereby providing reasonable time for those enterprises that may be adversely affected, to make adjustments to their business plans. The proposal does not in any way threaten those producers that operate cellar door businesses, creating added economic benefits to regions.
Furthermore, if the status-quo is to be retained, it is legitimate to ask the question of all of industry, rather than simply the rebate beneficiaries, “Is this the most appropriate way to apply tax payer funded support to the wine industry”?
Page 9 of the discussion paper outlines details of the amount of WET paid with an estimate of refunds. It also highlights that because of the way WET Rebates are claimed via BAS statements, together with other WET credits, it is not possible to obtain the exact quantum of WET Rebates claimed.
Page 13 discusses average prices over the past 15 vintages. That trend is alarming and harming all of industry. No-one will argue it can be sustained. It would be misleading to suggest that the WET Rebate is the sole cause of these declining grape prices.
Surplus supply, the GFC, adverse exchange rates and increased competition have all exacerbated the trend. These factors present challenges as they do to other industries. However, there is an abundance of evidence that the WET Rebate is also a significant factor with some recipients positioning themselves to undercut their Australian competitors in both domestic and foreign markets. The practice of passing on the benefit is becoming commonplace, thereby setting new, lower benchmark prices for much of Australia’s bulk and unbranded wine. That behaviour is having a “race to the bottom” affect.
Page 17 provides a summary of the very broad group of entities eligible for the rebate in the way that was never envisaged when the WET Rebate was introduced.
Riverland Wine members are urged to read the report and provide comment to enable this organisation to prepare another submission for consideration by the panel after September 11.
Read the discussion paper on the Treasury website.