Domestic winemakers continue to resist taxation of still wines. At Tuesday’s meeting, interdepartmental working groups came up with a proposal to introduce a minimum price for ethanol in wine. They want to weaken cheap foreign competition.
According to them, the proposed change will end up with cheap low-quality wines and will bring more revenues from VAT to the budget. At the same time, they admit that they have yet to document real numbers with impacts.
“Our homework is to sit down with representatives of the Ministry of Finance,” says Martin Chlad, president of the Winemakers’ Association, in an interview for Nauzal.
He emphasizes that taxing still wines is still unacceptable for people in the industry, even during teacher and doctor strikes. “Do we want to approach things ‘Fall to whom you fall’ and feed the idea of neo-communism, so everyone is the same?” he asks.
Have you averted the taxation of still wines and are you clear for how long?
No. I would divide it into two things. Taxation of still wines is not included in the consolidation package, but we did not avert the debate. The Ministry of Finance continues to propose the introduction of the tax, albeit in four variants with different rates. We are still categorically opposed under the current circumstances. We just added one more suggestion that could solve the problem.
You come up with a proposal for a minimum price for ethanol in wine, which would mean, for example, the end of cheap boxed wines. How do you think it will change the alcohol market in the Czech Republic?
It is evident that this would not have a negative effect on budget revenues. With the increase in the price of the cheapest alcohol, we are talking about new revenues on the VAT side.
We would also eliminate the most risky group of consumers who are struggling with the cheapest alcohol. She would be systemically weaned from him. So we also take health aspects into account. We want to have something to do with cultural drinking and wine as a quality food.
So how much do you think the cheapest liter of wine should cost?
We had Mendel University calculate different equivalents with a minimum price of, for example, 60, 70 or 80 crowns per liter of wine and what that would mean for other commodities. It also depends on whether we are talking about an increase in the production price or the resulting price per shop. We don’t want to throw the hausnumer, that has to be the subject of another debate.
You mentioned that some wines are imported even for a few euro cents. So who will benefit if the wine sells for much more?
This question must be defined by the expert team so that we eliminate the input of the raw material here at the beginning by the institute of the minimum price.
Do you have any factual evidence that raising the minimum price will bring extra money to the state budget?
Our homework is to sit down with the Ministry of Finance and we will begin to address the necessary legislative steps, as well as the concrete impacts. We have figures from Ireland and Scotland where they have introduced minimum prices. We will deal with the application to our market in the next month.
And how did these changes manifest themselves in Ireland or Scotland?
We are talking in the order of units or lower tens of percent, in terms of pathological phenomena, reduction of hospitalizations, accident rate.
“We eliminate pathological phenomena”
Do I understand correctly that the introduction of a minimum price for ethanol in wine will realistically reduce the number of accidents caused by alcohol?
Today, when someone sits in front of the main station and indulgently drinks alcohol for 35 kroner and doesn’t buy it so cheap, it logically eliminates pathological effects on the part of the state. And these are decreasing in the mentioned countries.
Did you try out the proposal with breweries or hard alcohol producers? Is it enforceable?
We are in constant contact. However, with leather we go to the market with the commodity of wine. We want calculations and necessary legal steps to be taken based on this. Logically, the rest of the sector would have to be invited to this as well.
Can’t critics object that similar considerations only delay the taxation of still wines?
If wine taxation is not resolved at the European level, we do not want to debate it now, nor in a year, nor in 10 years. We are serious about our proposal, as evidenced by other plans for better market transparency.
In contrast, the Ministry of Finance proposes four variants with different rates of consumption tax on still wines. None of the options are acceptable to you?
No, and it’s not about the rate now. From the point of view of European legislation, only two rates can be applied – the main one and then the second one, which cannot be lower than half of the main one. Our wine market is not ready for implementation. We have 13,337 winemaking entities. Today we are talking about 27 controlling customs. Then when someone talks about effective controls and suppression of the gray market, it is unrealistic. If someone wanted to enforce taxation, it would only deepen the non-transparency of our market.
Regarding taxation, you rely on the arguments from the new impact study, which was prepared by the working group. The document says that taxing the state coffers would only bring in an extra 1.45 billion crowns. The Ministry of Finance, based on data from the National Economic Council, previously mentioned more than four billion. How did the discrepancy arise?
That’s laughable. At the beginning, NERV prepared a working document for the government. The billions were arrived at by the linear product of wine consumption and the proposed excise tax rate. But that’s nonsense. Logically, some impact of measures on consumption must be taken into account. Already today, the wine market is falling by ten percent. Even that default number is no longer objective. NERV knew that it was necessary to add factors that would logically reduce that amount.
For example, the impact study claims that the introduction of consumption tax would reduce the consumption of Czech wines by a quarter. What is this number based on?
I want to dispel the objections of critics who say that winemakers commissioned a study with results. It was done by several reputable agencies. No company dares to gamble with its name just because of whose desk the document is headed to. Relevance is high.
However, the study mentions specific negative effects of taxation on VAT collection, reduction of employee levies, expansion of the black market, all expressed in numbers. How did she arrive at these estimates?
They primarily used Eurostat, the Czech Statistical Office, the Ministry of Finance and data from customs officials. Research agency Focus used a questionnaire survey that they have been developing for 20 years for the wine segment as well. The respondents were a thousand wine consumers across the consumer structure. Penalties within the wine sector were mapped on a group of 350 winemakers.
Is it happy to defend the non-taxation of wine at a time of teacher strikes or upcoming health workers’ protests?
Do we want to approach things “Fall to whom you fall” and feed the idea of neo-communism, i.e. everyone equally? Those fields have different conditions. The special wine legislation has over 600 pages. Breweries and distilleries in the order of tens of pages. From the logic of the matter, there is a disproportion, why is it not so easy in our field. We have a whole range of other levies and payments that are not dealt with by other branches.
Just because a consolidation package presents certain inadmissibility for another field, you do not cut another field without justification. I want to emphasize that we are representatives of primary production. That’s where money is born. If we paralyze primary production, then there will be a lack of system money for teachers or officials.
You reject taxation, at the same time you mention the necessary amendments to the Wine Act. What needs to be changed in the law?
Above all, define very well who is a domestic producer, grower. We are exposed to two-thirds import pressure. It’s getting more intense. Domestic winemakers are harmed by every consideration such as consumption tax. We need to straighten the market first. For example, France, as a wine country, has a clear definition of who is the producer and therefore the excise tax payer. They have an excellent system of selection, but also control and penalization, which at a certain point is existential. We have to solve it with an amendment to the law.
I hear from the winegrowers that they have been criticized by ordinary people for not being taxed. Aren’t you defrauding the consumer by not taxing yourself?
It happens to some extent for three quarters of the year. We have no media to influence the public. A lot of unprofessional interventions or articles only skimmed the surface. All we have to do is patiently lead the professional debate. The fact that we don’t go populist on the consumer just proves that we mean it.