The managing director of De Bortoli, one of Australia’s largest family owned wineries believes the Wine Equalisation Tax (WET) poses a bigger threat to Australia’s wine industry than the high Australian dollar.
The WET grants small wine producers tax breaks, while medium to large sized wine producers are exempt, which makes it easier for the former survive amidst an uncertain climate.
Under the scheme, all wine producers can claim as much as $500,000 in rebates, however those that earn more are essentially exempt from the 29 percent tax, reports ABC News.
Darren De Bortoli, managing director, De Bortoli wines said the WET rebate is driving wine prices down.
"It has this compounding affect of driving wine prices lower. As wine prices go lower, the government's tax take on the winery industry drops as well.
"Then this WET rebate rort is escalating so they're paying out more money on the other side. It's absolutely a crazy situation, at the same time it's creating massive market distortions,” he said.
He said supermarkets in particular tend to benefit from the rebate because they can purchase wines from smaller producers at cost price.
"They [the small wine producer] can sell at cost because their margin is now coming purely from the rebate," he said.
He believes the rebate should be altered so it applies to retail and online stores only.
The WET rebate is currently being reviewed by the Winemakers Federation of Australia, and while board member Colin Campbell admits there are problems with the system, he believes it needs to stay.
"The benefits that have come out of the rebate have been enormous.
"It's not only small wineries, but the big wineries, because the $500,000 can be claimed by all sizes so I think everyone benefits from it,” he said.
De Bortoli wines recently reported a full-year loss of $24 million.