‘Vino tax has put Maltese wine at risk’

The  2015 budget has local wine-makers worried, and with good reason – it introduced a practically unprecedented tax on wine that is set to put further pressure on an already fragile local industry.

Viticulturalist and Marsovin CEO  Jeremy Cassar explained that the future of his 100-year old family business may be in jeopardy thanks to the new 15c-per-bottle tax on wine. 

Cassar represents the fourth generation of the family that founded the local wine producer and which still runs the business to this day. He opposes the tax on several grounds: firstly, because it may put Maltese wines at a disadvantage vis-a-vis foreign imports, secondly because the government did not consult with any local winemaker before proposing it and thirdly because no detailed information regarding the tax has been forthcoming in the three weeks since the budget speech was made.

“The only other European country that imposes a tax on wine is France, and the amount is minimal, around 3c.”

France aside, those EU countries that do currently levy taxes on wine – Ireland for example – are wine-importing countries, with no locally produced wines.

 “This agri-tax, for that is what it essentially is, puts the viability of Maltese viticulture at risk,” Cassar said, describing it as “completely negative” – one which detracts from the ability to support, develop and sustain the local product, giving nothing in return.

The Marsovin CEO expects it will negatively affect local wine producers’ ability to compete with the glut of cheaply produced foreign wines flooding the market, explaining that many foreign wines can afford to sell their products for lower prices than those made locally due to the sheer economies of scale involved. He also questions why the tax is only to be levied on wine and not on other alcoholic beverages, a fact which can only create even more disruption in the market.

This opinion is echoed by Mark Miceli Farrugia, chairman of the Meridiana Wine Estate, who points to the largely imported spirits sector. “Tax revenue would have been best raised from a higher excise duty on these products [spirits], especially given the fragility of the wine market and the popularity of spirits with the younger alcoholic beverage consumer,” he says. 

Miceli Farrugia believes that the introduction of the wine tax was made with little consideration to the burden it would be imposing on the relatively fragile local wine industry, pointing out that the wine sector is still recovering from the heavy investment and the competitive market situation it has had to confront since EU accession.

Cassar said wineries dependent on entry-level wines are the worst affected because the increase would represent a higher percentage of the total price. He believes the sole reason behind its introduction was revenue-raising.

“The sector is already in difficulty as it is. Make no mistake – it has come a long way but still has a long way to go,” Cassar adds.

Most galling of all, however, is the complete absence of consultation with the sector itself in the formulation of the tax, which came as a bolt from the blue.

“There was no prior warning and we were never notified or given any details, even after the budget,” Cassar said, describing the level of communication with the ministry of finance as non-existent. “The first I heard of the tax was when a friend called me up the day after the budget speech.”

He says that his numerous attempts to contact the ministry were met with silence. “The Budget was the first and last time that the ministry ever mentioned the wine tax. We know it is coming, but other than that, no details have been released.

“To my knowledge, the tax came as a surprise even to senior decision-makers within the ministry responsible for Agriculture,” Mark Miceli Farrugia said.

Karl Chetcuti, Meridiana’s general manager, confirms that his company is also yet to be told exactly how the new system will work. The only certainty is that “the new system will impose additional hours of work and costs, which will have to be passed on to the consumer”.

Vitimalta, the organisation representing Maltese wine producers, recently released a statement expressing concern about both the impact of the tax on competitiveness of Maltese wines, as well as with “the levity and lack of discussion with which it was presented”. The statement called on the government to recognise the “exemplary role played by Malta’s promising wine sector” and its importance to consumers and farmers as well as producers, whose families depend on the industry.

Questions sent to the Ministry of Finance on Thursday regarding the details, justification and economic impact projections of the tax remained unanswered at the time of going to print.

All in all, the surprise tax has dealt a dispiriting and undeserved blow to local wine producers who have worked hard to continuously improve the local product, winning international recognition in the process.

The Marsovin CEO cut a forlorn figure as he surveyed the company vineyards near Marsaxlokk. “We have invested in refining the grapes, we have sent people on courses abroad to study viticulture, we employ hundreds of locals and preserve a unique part of Maltese culture. Our vineyards attract tourists and we supply practically every restaurant on the island. Why is the Maltese wine sector being treated so badly?” he asks.

“We don’t deserve to be treated in this way, we have a very important role in Malta, both with regard to the environment as well as society as a whole.”