Fortified wine hurt by tax change

By LIAM DANN

"We might as well shut our door. That's the way it's going." That was the reaction of Maria Farac, of Mother's Cellar winery in Henderson, to the Government's new liquor tax.

She was one of many grape growers to predict that the local fortified wine industry would be devastated by the sudden move to increase the tax on beverages with an alcohol content of between 14 per cent and 23 per cent.

New Zealand produces just 1.2 million litres of port and sherry a year - about 2 per cent of total wine production - but it is the main source of income for a cluster of long-established family businesses in west Auckland.

Farac said the reaction from her customers had been swift. She had already been advised by her largest buyer to put all sales on hold until further notice.

"If they don't take it then our cellar sales are next to nothing."

Her customers were all older people, pensioners or from the RSA, she said. "It's going to be a big hike in anyone's pension book."

Farac estimated that the tax would add $6.60 for every two litres she sold at the winery.

"That will take the price to $24 to $25 just from the cellar door," she said. "By the time it gets on to the wine shelves and into the RSAs you're looking at $30 a jar."

Other long-established fortified wine makers were just as shocked.

"I'm gutted," said Steve Sapich, whose father and uncles founded Sapich Brothers winery in the 1940s.

"I don't know what to think. I feel like I'm on the dole."

It was a tax on a tax because growers would be forced to pay more GST on top of the increased excise, he said.

Rado Hladilo, whose family-owned Mazuran's Vineyard has specialised in fortified wines for 60 years, was shocked by the news.

He was optimistic that sales of his top-end product would not be hit too hard but admitted it was a worry.

He struggled to see the Government's logic in believing this would combat teenage binge drinking.

"You won't see many young kids with a bottle of Mazuran port walking down Queen St," he said.

The tax would be disastrous for what was already a declining wine product, said chairman of the Wine Institute and Montana managing director Peter Hubscher. "It will kill the category."

He estimated the tax would add about $5 to the retail price of a 750ml bottle of port.

He was in the process of contacting the Government to see what could be done, he said.