Shiraz, Sauvignon and Champagne: The Old and New Wine Nations and Indirect Tax

Abstract

Australia, New Zealand and France employ different indirect tax systems for wine that are a result of numerous factors such as economic, social, cultural and historical. This paper seeks to compare the indirect tax laws on wine of the ‘Old World’ wine country (France) and the two ‘New World’ (Australia and New Zealand) wine countries. The aim of comparing these indirect taxes is to help inform the debate about the indirect taxation of wine. This is highly relevant given the upcoming review of Australia’s tax system. First, this paper examines the rationale for specific wine taxation. Secondly, the paper provides an overview of the goods and services tax (also know as the value added tax), sales tax (also known as the Wine Equalisation Tax), customs and excise duties that apply to wine in Australia, New Zealand and France. Thirdly, the paper examines these wine tax policies based on the generally accepted tax policy criteria of fiscal adequacy, economic efficiency, equity and simplicity. The paper finds that there is no strong case for a specific tax on wine on tax policy grounds. On this basis, the tax policies of old world countries such as France that lightly tax wine appear to be preferable over new world countries such as Australia and New Zealand that impose significant levels of specific taxes on wine.