Chilean wineries to get squeezed by taxes and sluggish economy
Date£º
2014-05-26 10:25 Source£º
www.harpers.co.uk Author:
Erin Smith Translator:
A slowdown in Chile¡¯s economy and a possible tax restructure being debated in Congress would raise the price of wine and squeeze already-struggling producers.
Chile¡¯s Central Bank released figures this week indicating an economic slowdown,
with growth hitting a four-year low, declining by 2.6% in the first quarter of
2014.
The tax would push the average price of wine in Chile in the over price of beer
because alcohol tax will be based on the alcohol by volume of the drink. The
proposed tax would be between 15% to 18% with a varying 0.5% tax per degree of
ABV. In total wine could be taxed on average 24% per bottle.
The argument for the proposed tax is to bring Chile¡®s alcohol tax to be closer
to other Organisation for Economic Co-Operation and Development (OECD).
However, those opposed to the tax also site other member countries such as
Spain, France and Italy as not having a wine tax and such a significant tax
would be harmful to wine producers in the country.
Producers also are concerned that with a decline in the local market, trying to
drive exports would be increasingly more difficult.
Chilean currency has continued to weaken since the beginning of the year. As of
January of the year the peso was trading at 870.97 per 1 Great British pound and
is now trading at 930.07. Other developing countries¡¯ currencies, like South
Africa, have been declining at more rapid rate and have been growing their
market share particularly among entry level wines.
Chilean wine has seen a 4% declined in the off-trade and a 12% decline in the
on-trade in the UK, according to a Wine & Spirit Trade Association report
released earlier this year.