The Treasury Wine Estates Ltd (ASX: TWE) share price is up 1.79% in early trade to $10.79 per share.
This comes as the company lobbies the United Kingdom to rethink the nation’s proposed new tax system impacting wine imports.
Why is the UK’s new import tax regime of concern?
The Treasury Wine share price could come under renewed pressure if the UK doesn’t amend its new tax regime on imported alcoholic drinks.
Treasury Wine, which supplies the lion’s share of imported Aussie wine to the UK market, has warned that the new tax system will negate any hoped-for benefits achieved by the free trade agreement.
As The Australian reports, Treasury Wine’s CEO Tim Ford has written a submission to the UK government saying he supports their efforts to simplify the nation’s complex alcohol import taxes. But he notes that the current regime will unfairly hit Australian wines.
That’s because the import taxes will rise on wine (and other drinks) with an alcohol content of more than 11.5%. And more than half of Treasury Wine’s products have alcohol contents in the range of 12-15%. Most European wines, on the other hand, fall below the 11.5% threshold.
The UK’s import duties will also rise with each 0.5% increase in alcohol content. Ford says this narrow range should be expanded to 1.0% as Australian wines tend to have a significant alcohol content variance depending on environmental conditions.
In Ford’s submission he writes (quoted by The Australian):
Environmental conditions largely determine alcohol content in wine and are not readily modified after grapes are harvested. Hence, unlike some other beverage types that can innovate towards lower alcohol content, an increased duty burden placed on higher alcohol still wines [is] inherently a tax unavoidably borne by Australian producers…
TWE believes that further work needs to be done to modify the proposed new duty tax system to ensure that non-tariff, ‘behind the border’ measures do not distort the impact from the reduction in tariffs and retail prices that would result from A-UKFTA’s introduction.
The UK is the biggest importer of Aussie wines.
Treasury Wine share price snapshot
The Treasury Wine share price is down around 14% so far in 2022. This trails the 8% year-to-date loss posted by the S&P/ASX 200 Index (ASX: XJO).
Over the past 12 months, Treasury Wine shares are up 9%.
The post Treasury Wine (ASX:TWE) share price lifts amid latest tariff battle appeared first on The Motley Fool Australia.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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