Champagne almost unintentionally exempted from excise duty

A New Zealand Customs Service spokesperson said the error was made in 2016 during the drafting of the Customs and Excise Bill. Photo / 123RF

A drafting error in law that would have lowered the price of champagne by omitting it from alcohol excise and excise-equivalent table is about to be corrected in Parliament.

The mistake would have come into effect on October 1 but will be corrected by a supplementary order paper.

Last year, the New Zealand Customs Service collected about $2.7 million in excise-equivalent duty on champagne and about $2.3 million the year prior.

Customs Minister Meka Whaitiri said the mistake was made by Customs during the preparation of the Customs and Excise Bill.

"The Customs and Excise Act 2018 replaces the 1996 Customs and Excise Act that is over 20 years old and, in some parts, over 100 years old.

"The structure and drafting of the new Act has been rewritten and modernised, and that process is where this error occurred."

Whaitiri said she had conveyed her disappointment to Customs about the error.

"I am now confident the necessary steps are being taken to ensure the error is rectified and corrected before the commencement of the Customs and Excise Act 2018 later this year," she said.

"I have been assured by Customs it has put measures in place to prevent a similar error occurring again."

A New Zealand Customs Service spokesperson said the error was made in 2016 during the drafting of the Customs and Excise Bill.

The mistake was identified in June 2018 as part of Customs checking processes in preparation for implementation of the Customs and Excise Act 2018 in October, she said.

"Customs has tightened and strengthened the checking process."

Spirits New Zealand CEO Robert Brewer said it was good to see the Bill tidied up to ensure all imported beverage alcohol was subject to an excise.

"The impact on overall tax-take for Government would have probably been minimal since champagne is taxed at about $22 per litre of alcohol at the border and imported volumes are probably relatively low - but it's good to see this being fixed.

"However, not many of us realise that the excise on spirits – at $52 per litre of alcohol - is over double what it is for beer and wine and, along with GST, accounts for almost 75 per cent of the legitimate retail price for spirits.

"The impact of this excise difference is that it makes spirits an attractive smuggling prospect as well as being a burden on our growing New Zealand distilling industry."