The imposition of a 20c per litre excise duty on wine in the last Budget seems to have ruffled the feathers of local wine producers who have complained about the uncompetitive impact of the tax.
With the government striving to make both ends meet in its management of public finances, the real cost of a bottle of wine has more important implications than the total expenses incurred to produce it.
Wine producers are clamouring for continued special treatment of this industry, saying this is one of the key agricultural sectors that played an exemplary role to the benefit of consumers, farmers, and producers.
They fear that a flood of cheap imports from partner nations will destroy the achievements of this industry since Malta joined the EU.
On the other hand, the government faces tough challenges to meet its fiscal obligations that are now closely scrutinised by the European Commission. It argues that an excise duty of 20 cents on a litre bottle of wine is a cost that is not excessive for wine consumers but which helps to defray other costs which it needs to incur to provide public services.
The imposition of excise duty is common practice in the EU. According to the European Commission Excise Duty tables published on the website wine-search.com, various EU countries impose excise duty on wine.
Ireland is the country that imposes the highest duty at €4.24 per litre. France imposes a duty of 4c per litre, while the UK, which also has a miniscule wine industry of its own, charges excise duty of €3.33 for a litre of wine. So Malta’s duty of 20c is among the lowest in those countries that actually tax wine.
Wine consumers will ultimately have to pay this duty. But they expect to benefit from the dynamics of competition and the abundance of choice that this brings with it. Some may argue that paying an extra 15c for a 0.75 litre bottle of wine is a cost worth incurring if it means this will partly reduce the need to increased taxation on other more essential items.
Wine producers may have a point in arguing that they should have been consulted before this measure was introduced. But the risk of panic buying of wine in the months before the introduction of this modest tax may have offset the advantages of consultation.
It is difficult for the local wine industry to prove that it is not competing in a regulatory level playing field. The fact that the local industry does not have the economies of scale enjoyed by the industry in France or Italy is a reality that should not, however, justify special treatment.
Other economic activities like the furniture and pasta industries faced similar challenges but were not granted special treatment.
The local wine industry must be congratulated for finding a niche market locally by producing high quality wines that compete effectively with similar imported products.
Tourists and many local consumers will always prefer to buy good quality locally produced wine, even if cheaper imported wines are available.
The future of the local wine industry will depend more on the ability of producers to provide and market good quality wines for the local and possibly the export market than on any artificial protection that will give special treatment to this industry.
However, the government needs to make sure this excise duty will not be increased further in the coming budgets to ensure this important sector continues to thrive.