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Wine tax reform: The impact of introducing a volumetric excise tax for wine

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  • Fogarty, James Joseph
  • Jakeman, Guy
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    Abstract

    In addition to the GST, alcohol sold in Australia is subject to excise tax. Although both beer and spirits are subject to a volumetric excise tax, wine is subject to an additional value added tax known as the Wine Equalisation Tax (WET). The recent Henry tax review recommended substantial changes to Australian alcohol taxation policy. Here, the implications for the wine industry of the Henry tax review recommendations are explored using a computable general equilibrium model. The results show that: (i) replacement of the WET with a revenue neutral volumetric excise tax would have a small negative impact on the wine industry; (ii) removal of the WET rebate would have a substantial negative impact on small wineries; and (iii) applying a uniform alcohol tax equal to the packaged beer excise rate across all alcoholic beverages would have a notable negative impact on the wine industry.

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    Bibliographic Info

    Paper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 108667.

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    Date of creation: 06 Jul 2011
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    Handle: RePEc:ags:uwauwp:108667

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    Related research

    Keywords: wine; alcohol taxation; general equilibrium modelling; Demand and Price Analysis; Health Economics and Policy; R13; H23;

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    1. Pannell, David J., 1997. "Sensitivity analysis of normative economic models: theoretical framework and practical strategies," Agricultural Economics, Blackwell, vol. 16(2), pages 139-152, May.
    2. Pannell, David J., 1997. "Sensitivity analysis of normative economic models: theoretical framework and practical strategies," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 16(2), May.
    3. Kenneth Clements & Wana Yang & Simon Zheng, 1997. "Is utility additive? The case of alcohol," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1163-1167.
    4. Kenkel, Donald S, 1996. "New Estimates of the Optimal Tax on Alcohol," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 296-319, April.
    5. Xueyan Zhao, 2010. "What Do the Bingers Drink? Micro-unit Evidence on Negative Externalities and Drinker Characteristics of Alcohol Consumption by Beverage Types," Wine Economics Research Centre Working Papers 2010-07, University of Adelaide, Wine Economics Research Centre.
    6. Hanoch, Giora, 1975. "Production and Demand Models with Direct or Indirect Implicit Additivity," Econometrica, Econometric Society, vol. 43(3), pages 395-419, May.
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