Chilean winemakers in fear of tax hike

A proposed tax hike could force some Chilean winemakers and grape growers out of business, it has been reported.

Wine is currently taxed at 15% per litre within the wholesale market, however, if proposals are passed by the country’s government, in September this would rise to 18%, plus 0.5% per degree of alcohol, representing a 60% rise for wines with a 12% abv.

Winemakers fear the tax will hit smaller producers who rely on the local market hardest, potentially forcing many out of business, by driving down wine sales and driving up beer sales, according to a report by Wine Spectator. 

Four decades ago, 86% of alcohol consumed in Chile was wine, whereas now the figure stands at 34% with beer and spirits edging in on the domestic market.

Without a strong domestic market, the industry will be weakened, with Aurelio Montes of Viña Montes, and vice president of Wines of Chile, declaring that the tax hike would be “devastating” for small producers who sell their grapes for wine for local consumption.

He said: “Wine is not a simple economic activity. If a small farmer has to pull up his vines because the proposed tax forces him out of the marketplace, it is not the same as a neighbourhood shop closing and re-opening as a shoe store.”

Those in favour of the tax say it will raise vital revenue for educational projects while preventing excessive consumption, however Montes said the wine industry has long had an “impressive agenda dedicated to education, training and certifying workers,” and that hurting their industry “made no sense.”

To date 45,000 people have taken part in training initiatives to prepare for a career in viticulture, Wines of Chile said, with an increase to tax threatening the funding if such programmes.

Members of the industry are currently in talks with the Chilean government in an attempt to prevent the tax hike.

Blanca Bustamante, corporate communications manager for Viña Concha y Toro, added: “Our views are absolutely in line with Wines of Chile. We are working together with them to present our opinion and voice.”