Winegrape and Wine Industry in Australia

[Pages:100]Winegrape and Wine Industry in Australia

"PROTECTED - UNDER EMBARGO UNTIL TABLED/RELEASED BY PARLIAMENT"

A Report by the Committee of Inquiry into the Winegrape and Wine Industry

Final Report June 1995

WINEGRAPE AND WINE INDUSTRY

TABLE OF CONTENTS

Abbreviations Preface Terms of Reference EXECUTIVE SUMMARY RECOMMENDATIONS

PART I: INTRODUCTION

1 NATURE AND SCOPE OF INQUIRY

Page xii xv xvi

1 17

25

PART II: INDUSTRY AND MARKET INFORMATION

2 THE AUSTRALIAN WINEGRAPE

AND WINE INDUSTRY

35

2.1 Grapegrowing

36

2.2 Wine production

48

3 REGIONAL SIGNIFICANCE

57

3.1 Regional dispersion

57

3.2 Contribution to regional economies

66

3.3 Summary

72

4 WINE MARKETS

75

4.1 The domestic market

75

4.2 Composition of demand

78

4.3 Distribution arrangements

84

4.4 Domestic price trends

86

4.5 The export market

87

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5 POTENTIAL FOR DEVELOPMENT

93

5.1 Market outlook

93

5.2 Strengths, weaknesses, opportunities and threats

96

PART III: MAJOR ISSUES

6 RESEARCH AND DEVELOPMENT

111

6.1 Introduction

111

6.2 Rationale for public funding

113

6.3 Grape and Wine Research and Development Corporation 116

6.4 Cooperative Research Centre for Viticulture

117

6.5 Assessment of institutional arrangements

120

6.6 150 per cent tax concession for R&D expenditure

125

7 THE ROLE OF THE AUSTRALIAN WINE

AND BRANDY CORPORATION

127

7.1 Historical background and curer nt operations of the AWBC128

7.2 Export controls

130

7.3 Promotion

134

7.4 International trade relations

137

7.5 Food standards

138

7.6 Truth in labelling

140

7.7 Assessment and proposals for change

141

8 IRRIGATION AND WATER ISSUES

167

8.1 Introduction

167

8.2 Allocating rights to water use

169

8.3 Areas for reform

190

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9 OTHER IMPEDIMENTS

193

9.1 Packaging costs

193

9.2 Labour and training issues

199

9.3 Grape supply arrangements

209

9.4 State regulations

217

10 EXTERNAL EFFECTS OF ACLOHOL CONSUMPTION

225

10.1 Introduction

225

10.2 Effects on health of alcohol consumption

227

10.3 The costs of alcohol abuse

238

10.4 Measures to control alcohol abuse

243

10.5 Summary

247

11 TAXATION OF WINE AND BRANDY

249

PART A: Setting the scene

250

11.1 Introduction

250

11.2 Indirect taxation in Australia

251

11.3 Guidelines for judging taxation measures

259

11.4 Participants' views about the form and level of

taxes on wine

263

PART B: The Committee's recommendations

282

11.5 Taxation recommendations

282

PART C:Tax-related matters raised by the brandy

industry

314

12 OTHER TAXATION MATTERS

321

12.1 Wholesale sales tax treatment of wine used for tasting 321

12.2 Wholesale sales tax concessions for small business

325

12.3 Write-off allowance for establishing vineyards

328

12.4 Valuation of wine stocks for income tax purposes

330

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12.5 Taxation of `ready-to-drink' alcoholic beverages

336

12.6 Taxation of flavoured beverages with a fortified wine base340

12.7 The Fringe BenefitsTax

343

12.8 The Income Equalisation Deposits scheme

347

12.9 Assistance to develop export markets

349

12.10 Cash grants for winemakers

350

12.11 State and territory liquor licence fees

351

APPENDICES

A Participation in the Inquiry

361

B Key elements of the AWBC Act and regulations

369

C Transferability of water

379

D Assistance to the wine industry

387

REFERENCES

393

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Tables

Table 2.1: Table 2.2: Table 2.3: Table 3.1:

Table 4.1: Table 7.1: Table 8.1: Table 10.1:

Table 10.2:

Table 11.1: Table 11.2: Table 11.3:

Table 11.4:

Table 11.5:

Table 11.6:

Table 11.7:

Table 11.8:

Cost structure of grapegrowing regions Average grape prices by region, 1992?93 Winemaking cost structure Employment by wine and brandy establishments, by state, 30 June 1993 Major suppliers and buyers of wine, 1992 Export promotion funding by the AWBC, 1991?92 to 1993?94 Irrigated agriculture in Australia, 1992?93 Estimates of the economic costs of alcohol abuse by Collins and Lapsley, 1988 Estimates of the economic costs of alcohol abuse by the Tasman Institute, 1988 Australia's indirect taxes, 1993?94 Commonwealth, state and territory taxation of beverages Ad valorem equivalent tax rates: WST, excise and state/territory liquor licence fees Various alcoholic beverages, equivalent WST plus excise on a per litre of alcohol basis Estimated revenue collections from alcoholic beverages, 1993?94 Expenditure on selected products by household income quintiles, 1988?89 Illustrative comparisons of taxation arrangemnets for wine applying in Australia and European Community countries Alcoholic beverages, drinking sessions greater than four standard drinks per session

Table 11.9: Impact of majority proposal on tax paid: selected products

Table 11.10: Summary of the effects of Mr Scales' taxation recommendations, as at 1 July 2000

Table 12.1: Description of some `ready-to-drink' beverages sold in Australia and summary of associated taxation arrangements

Table 12.2: Interstate comparison of liquor ilcence fees

Table C.1: Water transfers in New South Wales

Table D1: Definitions of the classification of commodities used by customs for tariff purposes

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Table D2: Table D3: Table D4: Table D5:

The ad valorem and specific rates that apply to the classification of commodities used by customs for tariff purposes

Average nominal and effective rate of assistance, by activity, for the agricultural sector, 1990?91 to 1992?93

Average nominal rates of assistance on outputs for manufacturing industries, 1989?90 to 1993?94 and 1996?97

Average effective rates of assistance for manufacturing industries, 1989?90 to 1993?94 and 1996?97

Boxes

Box 1.1: Box 1.2: Box 2.1: Box 3.1: Box 3.2: Box 3.3: Box 3.4: Box 3.5: Box 8.1: Box 8.2: Box 8.3: Box 8.4: Box 10.1: Box 11.1: Box 11.2: Box 12.1: Box B.1: Box B.2: Box B.3: Box B.4: Box B.5: Box B.6:

Major strengths, weaknesses, opportunities and threats Wine industry plan for 2010-- key aggregates Modern vineyard technology The Yarra Valley region The WA wine industry The wine industry in Tas, Qld and the ACT region Participants' estimates of regional employment Major suppliers locatedin the Barossa Valley Initiatives to reduce transmission losses What are property rights? Measuring river salinity Tradeable discharge permits to reduce salinity Private and external costs Defining the terms Wine and wine taxes in New Zealand Wine companies and compliance with the FBT Objects of the AWBC Act Powers of the Corporation Contracts for carriage of grape products Part 2 -- General export controls Conditions of export Powers to set export prices and quantities

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Figures Figure 2.1: Australian grapegrowing, 1975?76 to 1994?95 Figure 2.2: Grape varieties used in Australian winemaking, 1993?94 and

projected production, 1996?97 Figure 2.3: MIA grape prices, 1964?65 to 1994?95 Figure 2.4: Wine production in Australia, 1974?75 to 1993?94 Figure 2.5: Wine production by type, Australia, 1986?87 to 1993?94 Figure 2.6: Employment, wine and brandyindustry, 1968?69 to 1992?93 Figure 2:7: World wine production, 1992 Figure 3.1: Winegrape production by region Figure 3.2: Change in premium portion of winegrape crop, by region,

1987?88 to 1993?94. Figure 3.3: Share of wine production, by state, 1993?94 Figure 3.4: Total wine production, by state, 1982?83 to 1993?94 Figure 4.1: Domestic consumption of wine, 1948?49 to 1993?94 Figure 4.2: Annual per capita domestic consumption of alcoholic beverages,

1964?65 to 1993?94 Figure 4.3: Domestic sales of Australian table wine, by container type,

1977?78 to 1993?94 Figure 4.4: Domestic sales of Australian wine, 1970?71 to 1993?94 Figure 4.5: Domestic sales of Australian wine, by type, 1993?94 Figure 4.6: Domestic consumption and imports of brandy,

1971?72 to 1993?94 Figure 4.7: Alcoholic beverages, price movements, 1975?76 to 1993?94 Figure 4.8: Export value and volumes, 1980?81 to 1993?94 Figure 4.9: Exports by major market, 1985?86 to 1993?94 Figure 4.10: Exports to the United Kingdom,1980?81 to 1993?94 Figure 4.11: Exports to New Zealand, 1980?81 to 1993?94 Figure 5.1: Wine consumption of ten largest importers and Australia Figure 8.1: Grapevine irrigation method, by state, 1990 Figure 10.1: Consumption of standard drinks on last occasion, by age, 1990

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