Breweries want same tax rules as wineries

Brewers Guild president Emma McCashin says small breweries often need to store beer offsite, which means they pay tax ...
ALDEN WILLIAMS/FAIRFAX NZ

Brewers Guild president Emma McCashin says small breweries often need to store beer offsite, which means they pay tax upfront.

The Government has begun tackling a 20-year-old alcohol tax policy which the beer industry says has unfairly disadvantaged brewers and not winemakers.

Under existing laws, wineries have the freedom to store wine in off-site storage areas for as long as they need to without paying tax, but breweries do no have the same privilege.

When beer is removed from a brewery it immediately incurs excise tax, unless it is stored in a customs controlled area (CCAs).

Moa chief executive Geoff Ross says existing tax laws can be a hindrance to craft breweries' cashflow.
DAVID WHITE/FAIRFAX NZ

Moa chief executive Geoff Ross says existing tax laws can be a hindrance to craft breweries' cashflow.

As a result breweries, along with cider and spirits producers, are having to pay tax upfront before selling goods, which can impede cashflow, particularly for smaller breweries.

Customs Minister Nicky Wagner said she was aware that the rules for off-site storage of beer had been raised by the industry and "these issues are being addressed" as part a Customs and Excise Act review.

New Zealand Customs spokesman Richard Bargh​ said wineries were given an allowance to not pay off-site storage excise duty in 1996 when the industry was in a high growth mode.

"The breweries have much more limitations, that's why they're looking for change," Bargh said.

Breweries wanted to be treated the same way as wineries because they were growing as businesses and needed to ensure they had the ability to store stock, he said.

The current act allowed for temporary storage of beer in off-site areas on a case by case basis which some breweries had used, he said.

Brewers Guild president Emma McCashin​ said 20 years ago it would have been difficult for law makers to have predicted the radical transformation of New Zealand's brewing industry.

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The rise of contract brewing, barrel ageing of beer and increased stockholding were relatively new developments.

The Brewers Guild would welcome improvements to the way excise tax was administered and collected, she said.

"It's entirely fair and reasonable that brewing is on an equal footing," McCashin said.

The rise of New Zealand's craft beer industry has been unprecedented with ANZ estimating sales growth of more than 40 per cent per annum.

Many of the country's breweries are located in metropolitan areas with barely enough room to manufacture the beer let alone store it.

McCashin said breweries often needed to brew extra beer to meet particular demands for example in the lead up to the busy summer period, for export or special events.

Smaller operations often needed to store this stock elsewhere.

Geoff Ross, the chief executive of craft brewery Moa, said it used a "bonded" warehouse in Marlborough where it stored beer without paying tax but it did not have one in Auckland, where it had better access to customers and its head office.

"We would love to have one in Auckland but at the moment we would be penalised to do so," Ross said.

Ross said cashflow was critical for many craft brewers which generally had a lot of up front costs such as hops and bottles.

Breweries cashflow would improve if beer had the same excise duty rules as wineries, Ross said.

"It's an anomaly which is disadvantaging craft beer brewing in New Zealand."

Brewers Association spokesman Kevin Sinnott said improving the way excise tax was applied would give breweries more opportunity to grow, he said.

"We believe all alcoholic beverages should be treated equally and brewers should be able to utilise offsite storage to reflect modern brewing requirements and more flexible supply chains," Sinnott said.

Wagner said any changes to the the rules around offsite storage needed to first be approved by Cabinet and then go through the parliamentary process, she said.

 - Stuff

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