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Wine export demand shocks and wine tax reform in Australia: Regional consequences using an economy-wide approach

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  • Kym Anderson

    ()
    (School of Economics, University of Adelaide)

  • Ernesto Valenzuela

    ()
    (School of Economics, University of Adelaide)

  • Glyn Wittwer

    ()
    (Centre of Policy Studies, Monash University, Clayton)

Abstract

We provide economy-wide modeling results of the national and regional implications of two current challenges facing the Australian wine industry: a decline in export demand for premium wines, and a possible change in the tax on domestic wine sales following the Henry Review of Taxation. The demand shock causes regional GDP to fall in the cool and warm wine regions but not in the hot wine regions unless the shock is large. A change from the current ad valorem tax to a similarly low volumetric tax on domestic wine sales causes regional GDP to rise in the cool and warm wine regions, partly offsetting its fall due to the export demand shock; but GDP in the hot wine regions would fall substantially. The switch to a volumetric tax as high as the standard beer rate would raise tax revenue and lower domestic wine consumption by more than one-third, but would induce a one-third decrease in production of non-premium wine as its consumer price would rise by at least three-quarters (while the average price of super premium wines would change very little), hence exacerbating the difference in effects of a tax reform on hot versus warm and cool wine regionsÂ’ GDP.

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Bibliographic Info

Paper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2009-02.

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Length: 30 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:adl:cieswp:2009-02

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Keywords: Wine export demand; wine consumer taxation; regional economy-wide modeling;

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  1. Preety Srivastava & Xueyan Zhao, 2010. "What Do the Bingers Drink? Microeconometric Evidence on Negative Externatilities of Alcohol Consumption by Beverage Types," Monash Econometrics and Business Statistics Working Papers 1/10, Monash University, Department of Econometrics and Business Statistics.
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