Change needed as excise tax on wine fails to meet its primary objective
The spectre of excise tax hovers over the heads of New Zealand’s domestic wine producers yet again.
Come 1 July, wine excise tax will go up by the consumer price index, something which has happened every year since 1991.
It is worth a reminder that the main public policy purpose of excise tax on wine is to moderate the consumption of alcohol. Unfortunately excise has become an important revenue gathering exercise but is totally inadequate as a means of changing people’s drinking behaviour.
I raise this point because the tax is not being passed on to the consumer; it is the wine producer who carries the cost. Since 1991 when excise was indexed to the CPI, inflation has risen 67% and wine prices 42%. That difference is an ongoing ‘body blow’ to the industry.
Tax must first be fair and then efficient. New Zealand boasts of having one of the most efficient excise collection systems in the world but in the case of the domestic wine industry excise tax is demonstrably lacking in fairness.
I am currently working with a number of Ministers and Government
departments to find a fairer way of collecting excise tax on wine. The
obvious way would be to collect the tax at the till as a transaction
between the retailer and the consumer. By doing this the price signal
intended by the excise tax will be sent to those whose drinking we hope
to moderate.
