The Effect of Changes in Alcohol Tax Differentials on Alcohol Consumption

Estimating the effect of transitioning to a strength-based alcohol tax system on alcohol consumption and health outcomes: a modelling study of tax reform in England

BACKGROUND

Increasing the amount of alcohol taxation is among the most effective measures for addressing the rising global burden of alcohol harm. However, less is known about the effect of changing alcohol tax structures. Substantial reforms to UK alcohol taxation structures enacted in August, 2023, mean that all alcohol is taxed based on its ethanol content, beers and ciders sold in on-trade premises (eg, public houses) are taxed at a reduced rate (hereafter called draught relief), and beer and particularly cider remain taxed at lower rates than other alcohol of equivalent strength. We aimed to model the effect of these reforms on alcohol consumption and health and economic outcomes, and the effects of hypothetical alternative scenarios.

METHODS

The Sheffield Tobacco and Alcohol Policy Model was used to estimate policy effects on alcohol consumption. The model is an individual-based microsimulation that uses data from the Health Survey for England, Living Costs and Food Survey, Hospital Episode Statistics, and the Office for National Statistics. Spending and revenues to retailers and the Government were estimated cumulatively for a 5-year period post-intervention. Policy effects on all-cause deaths, years of life lost, hospital admissions, and admissions costs were estimated cumulatively for a 20-year period post-intervention.

FINDINGS

The reform was estimated to decrease mean weekly alcohol consumption per drinker by less than 0·05 (-0·34%) units (1 unit=8 g/10 mL ethanol), and prevent 2307 deaths and 11 510 hospital admissions during 20 years compared with no policy change. Removing draught relief was estimated to prevent 1441 further deaths and 14 247 further admissions. Hypothetical scenarios showed that removing draught relief would only slightly improve public health outcomes, and increasing tax rates for beer and ciders to match other drinks of equivalent strength would reduce consumption by a further 2·5 units per week (-17%) and deaths by approximately 74 465.

INTERPRETATION

Alcohol tax structures based on alcohol strength enable tax policy to improve public health in a targeted way. However, the UK reforms are unlikely to substantially improve health outcomes as they do not raise taxes overall. Raising tax rates for the lowest taxed beer and ciders, which are favoured by those who consume harmful amounts of alcohol, could achieve substantially greater public health benefits and reduce health inequalities.

FUNDING

National Institute for Health and Care Research and UK Prevention Research Partnership.

Beverage-specific consumption trends: A cross-country, cross-sectional comparison

INTRODUCTION

The price of alcoholic beverages can vary for a range of reasons, including tax. Risky drinkers purchase more low-cost alcoholic drinks than moderate drinkers, contributing to beverage-specific risks for that category. The study aimed to examine the proportion of total alcohol consumption comprised by each beverage type and their correlates. Australian and New Zealand populations were compared, where drinking cultures are similar, but taxation of alcohol differs.

METHOD

Data was taken from the International Alcohol Control study in Australia (N=1580) and New Zealand (N =1979), a cross national survey that asks questions on beverage specific alcohol consumption at a range of different locations. Tax rates were obtained from previous analyses run on the dataset.

RESULTS

Ready to Drink (pre-mixed) beverages are more popular in New Zealand and the proportion of these drinks consumed out of total alcohol consumption by risky drinkers was correspondingly higher there. Conversely, the proportion of wine consumed by risky drinkers was higher in Australia. The consumption of spirits and beer by risky drinkers was similar in both countries.

DISCUSSION

Differences found for the proportion of beverages consumed by risky drinkers between the countries are fairly well aligned with differences in the taxation of each drink type. Future adaptations in taxation systems should consider the impact of taxes on preferential beverage choice and associated harms.

The effects of e-cigarette taxes on e-cigarette prices and tobacco product sales: Evidence from retail panel data

We estimate the effect of e-cigarette tax rates on e-cigarette prices, e-cigarette sales, and sales of other tobacco products using NielsenIQ Retail Scanner data from 2013 to 2019. We find that 90% of e-cigarette taxes are passed on to consumer retail prices. We then estimate reduced form and instrumental variables regressions to examine the effects of e-cigarette and cigarette taxes and prices on sales. We calculate an e-cigarette own-price elasticity of -2.2 and particularly large elasticity of demand for flavored e-cigarettes. Further, we document a cigarette own-price elasticity of -0.4 and positive cross-price elasticities of demand between e-cigarettes and cigarettes, suggesting economic substitution.