OPINION: Cellar door hit will leave glass half empty

NOT content with reneging on his commitment to return our fair share of coal royalties, our Premier Barry O’Farrell now wants to undermine our economic diversity by abolishing the cellar door rebate for our world-renowned wines.

I note attempts by the NSW Government to blame Canberra – nothing could be more untrue. 

It’s a complicated story but let me have a crack. 

Up until the 1990s, the wine was taxed by both the state and federal governments.

That’s right both; another wonder of our federal system.

Then in the late 1990s the High Court found the state tax (known as a Business Franchise Fee) to be invalid. 

Because these licensing fees were not unique to wine, the loss of state revenue would have been quite large.

So the Howard government came to the rescue by agreeing to increase its tax (the Wholesale Sales Tax) in order to raise what the states would have raised and to hand it back to them.

But Mr Howard’s job didn’t end there because by necessity, the federal government’s tax applied to all sales, including those at the cellar door which had been exempt from the state-imposed Business Franchise Fee.

So he asked the NSW Government agree to provide a rebate back for cellar door sales out of the Wholesale Sales Tax that he had handed back to them.

That way, no one was worse off as a result of the High Court’s decision.

Clear as mud, but then came the GST. Because the Wholesale Sales Tax was abolished under the GST, tax on wine would have gone from 41per cent to 10 per cent. 

Sounds good but from a public health and social perspective the majority view was that as tempting as it might seem, that was not acceptable public policy. 

This explains the introduction of the Wine Equalisation Tax (WET), set at 29per cent and possibly best described as a "top-up tax".

So then, a formula had to be found once again to ensure no one was worse off  (except arguably consumers) – not the wine makers, not the NSW Government, and not the Federal Government.

So what has changed? The answer is nothing except who governs NSW.

This revenue grab will hurt our local wine and tourism industry.

Competition with Sydney bottle shops is tough enough for our cellar door spruikers but the free wine tasting experience provides them with a competitive edge. 

Taking that advantage away will be a huge blow for them and our region. 

We can’t just sit back and rely on the coal industry for our future economic well-being. 

We must continue to build diversity, and wine tourism is one of our trump cards.

Yet Barry O’Farrell wants to undermine it for a lousy $3million annually.

Joel Fitzgibbon is the federal Labor Member for Hunter

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