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Abstract

In this article, the impact that a sales tax might have upon wine consumption and, hence, on the wine and grape growing industries, is analysed. Implications for government revenue are also considered. It is shown that the relative responsiveness of supply and demand, rather than the level in the marketing chain at which a tax is levied, determines where the tax burden finally falls. The imposition of a tax on wine might force certain sectors of the wine and grape industries to undergo a phase of adjustment. However, over the longer term, a tax would not necessarily alter the impact of other factors affecting the demand for wine. Additional taxes on wine of the form of a 10 per cent sales tax could be expected to increase government revenue from all indirect taxes by about 1 per cent.

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