WET equity
Treating small winemakers and microbrewers equally
Background
The Government announced in its 04/05 Budget that all wine producers would become entitled to a rebate equal to the WET liability on the first $1m worth of sales subject to WET, (or $290,000 of WET) and payable by the producer. The rebate will effectively result in 90% of Australian wineries not having a WET burden [1].
The rebate has been introduced as a direct result of lobbying from the Winemakers%u2019 Federation of Australia (WFA), in the interests of supporting rural and regional wine operators, their communities and supporting industries such as growers, tourist operators, etc.
The rebate extends to the entire industry, however, the rebate is payable only to a producer, and where that producer is part of a group of companies, the $290,000 capped rebate will only be payable once to the group.
The issue of whether the rebate is a tax concession or subsidy has not been resolved, and it is possible that the Government may have to extend the same concession to wine imported from New Zealand, and possibly all other WTO member states.
As part of the New Tax System, micro-brewers (as defined by a production size of less than 30,000 litres per annum) were given an excise break through a refund of excise up to a maximum of $10,000 per annum. The move was to restore some price competitiveness with larger brewers after the loss of a %u201Csmall business%u201D sales tax exemption that disappeared with the end of the wholesale sales tax regime [2].
Equivalence in brewing
Translation of the principles and administration of the proposed concession into the brewing industry in a pure sense would mean:
Issues to resolve in equivalence
Given the fundamental difference in taxation between beer and wine i.e. volume based versus value based, there may need to be a conversion from $1m of sales to a volume based equivalent in setting the production threshold.
The second issue is the %u201Cmechanism%u201D. The current methods of beer taxation (and rebates) are administered in the Excise Tariff Act, Excise Act and Excise Regulations, whereas wine tax is administered through the WET.
The Taxation Laws Amendment (Wine Producer Rebate and other Measures) Act was passed by Parliament on August 30th and was signed into law on August 31st 2004 %u2013 the same day Parliament was prorogued for the election. The bill before Parliament was a general Tax Law Amending Bill and there is no reason why a new Schedule could not be inserted into this law on a future occasion containing proposed amendments to the relevant excise law.
However, this may be unnecessary as a %u201Crebate%u201D for beer already exists in the Excise Regulations, for the purposes of meeting the Government%u2019s decision to protect price competitiveness for micro-brewers [3].
The Excise Act has fully delegated all excise duty rebate, refund and remission circumstances and administration to the Excise Regulations [4].
Significantly, Statutory Rules such as the Excise Regulations are amended by Executive Council (EXCO), and not by the Parliamentary process. EXCO comprises two relevant Government Ministers (e.g. the Treasurer, Assistant Treasurer, Minister for Industry, etc) and the Governor-General. The necessary amendment to the Excise Regulations will need Prime Ministerial approval to proceed to EXCO, and the amending Statutory Rule would be tabled in the Senate for review.
How to create a WET Rebate equivalent system in the excise system for beer
To create an industry wide rebate such as that applying to wine, the following amendments would be required to the Excise Regulations:
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