Impact of the GST and wine tax reform on Australia's wine industry: A CGE analysis

Abstract

<jats:p>This study analyses the impacts of the Goods and Services Tax (GST) introduced on 1 July 2000, and the associated wine tax reform, on both the premium and non‐premium segments of the grape and wine industry using a computable general equilibrium (CGE) model of the Australian economy. Through input cost reductions, the grape and wine industry is projected to gain from the GST tax package. Thus the industry can still gain even though wine consumption is taxed a little more heavily after than before the introduction of the GST. This is particularly so for the export‐oriented premium wine segment. A switch from the current <jats:italic>ad valorem</jats:italic> to a revenue‐neutral volumetric tax on wine under the GST is shown also to favour the premium segment of the industry, but at the expense of the non‐premium segment.</jats:p>