Wine investment rises as taxes drop
Posted by meb at February 21st, 2008
The Finance Ministry’s 45 percent reduction in the private consumption tax (ÖTV) imposed on table wine, which came into effect earlier this month, has begun to lure investors.
Wine producers, who had announced their decision to delay investment plans, are now taking action amid the tax reduction implemented on table wine that constitutes 80 percent of Turkey’s wine consumption.
İzmir-based Sevilen Wine Industry decided to invest on a 40-50 hectares vineyard in Denizli in the next few years. “It is our firm’s principle to invest our profits in vineyards. However, due to the high ÖTV we were unable to implement additional investments,” said Sevilen Marketing Manager and Board Member Enis Güner. “Finally, after this positive development, we decided to carry out a $1.5 million vineyard investment, which we had been delaying for two years.”
Tekirdağ-based wine company Bağcı also changed its investment plans. “We were in talks with foreign partners regarding our plans for a vineyard investment worth 4-5 million euros in Thrace,” said Bağcı Chairman Fehmi Bağcı. “However, we will now inform them that we have decided to undertake the investment alone.”
Through this tax reduction, the number of foreign companies interested in investing in Turkey will increase, said Güner. However, the sector needs a few years to witness a decline in unregistered production and to recover, he added.
Due to unregistered wine production, Bağcı has been facing serious problems. After recent developments, the company will rehire workers that were laid off during the hard times, said Bağcı. “We will hire 10 people in the coming days and have plans to provide employment for 10 more.”
Rakı and wine rivalry:
After the tax reduction in wine, the price difference between wine and rakı has slightly narrowed, said Bağcı. “Our chance to compete with rakı has increased. Turkish people prefer rakı to wine because of the absence of a wine culture. This situation may start changing.”
The new legislation will affect farmers positively as well, said Yasin Tokat, former chairman of the Wine Producers Association. “The wine sector has been deeply affected by the high ÖTV. It may take years to recover. But after the recent developments we remain optimistic and expect growth within the next two years.”
The farmers that are producing grapes for table wine will at least have an open prospect during production, said Tokat. “In Turkey, an estimated 100,000 farmers in Tekirdağ, Müreftei Şarköyi Denizli and İzmir earn their living from vineyards. The [tax] reduction will significantly help producers as well.”
The new arrangement is expected to change the preferences of hotels operating with an all-inclusive system that turned to wines of unregistered production due to the high ÖTV. Turkey’s tourism regions consume 20 million liters of unregistered wine annually, said sector representatives. Domestic wine companies will try to enter this market by reducing their prices after the tax cuts, the representatives added. Wine companies aims to reach record sales in March and April with the beginning of tourism season, they said.
The outlook for the wine sector
- Following the 118 percent private consumption tax enforced in 2005, domestic consumption deteriorated to six million liters.
- With the new arrangement, the lump-sum tax that will be imposed on grapes declined from YTL 3.28 to YTL 1.75 and excludes fresh grapes and sparkling wine.
- Tax imposed on other alcoholic beverages such as apple, pear and honey wine and mixtures of fermented beverages and non-alcoholic beverages also dropped to YTL 1.75 from YTL 3.28.
- The wines known as cheap table wines are sold at less than YTL 10. It is expected that the wines in that category will soon be 30-35 percent cheaper.
source: Turkish Daily News
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