Comparing taxes on alcoholic beverages in the Region of the Americas

BACKGROUND AND AIMS

Excise taxes represent one of the most cost-effective policies to reduce the harmful use of alcohol. Existing information about their design is limited and no standardized metric has been used to compare tax levels in the Region of the Americas. This study aimed to compare alcohol excise tax policies throughout the Americas, compare tax levels and consider opportunities to improve the impact of excise taxes on alcohol consumption and health.

DESIGN AND SETTING

Descriptive analysis using a method developed by the Pan American Health Organization and adapted from the World Health Organization's tobacco tax monitoring. Data were collected by surveying ministries of finance and reviewing tax legislation in effect as of November 2020 in the Region of the Americas.

MEASUREMENTS

Tax policy design indicators, taxes as a percentage of the retail price of the most-sold brand of beer, wine and spirits, including a weighted average indicator across beverage types, and tax levels per standard drink (10 g ethanol) in international dollars at purchasing power parity.

FINDINGS

Thirty-three countries in the Americas (94%) apply excise taxes on alcoholic beverages, with Argentina and Uruguay not applying them to wine. There is significant heterogeneity in excise tax design across countries and beverage types. Only a third of amount-specific excise taxes are regularly adjusted to avoid erosion. Regional median excise taxes represent the highest share of the price for spirits (21.4%) and the lowest for wine (11.0%). The regional median consumption-weighted average excise tax share across all beverage types is 12.0%. Excise tax shares are generally higher in Latin America than in the Caribbean and Canada. Excise tax levels per standard drink are generally lower for spirits than for other beverages.

CONCLUSIONS

Alcohol excise tax policies vary significantly across the Americas, often reflecting national consumption patterns. To maximize their public health impact, tax rates could be increased and tax designs improved, particularly to ensure higher tax burdens on high-strength drinks.

Pricing as a means of controlling alcohol consumption

BACKGROUND

Reducing the affordability of alcohol, by increasing its price, is the most effective strategy for controlling alcohol consumption and reducing harm.

SOURCES OF DATA

We review meta-analyses and systematic reviews of alcohol tax/price effects from the past decade, and recent evaluations of tax/price policies in the UK, Canada and Australia.

AREAS OF AGREEMENT

While the magnitudes of price effects vary by sub-group and alcoholic beverage type, it has been consistently shown that price increases lead to reductions in alcohol consumption.

AREAS OF CONTROVERSY

There remains, however, a lack of consensus on the most appropriate taxation and pricing policy in many countries because of concerns about effects by different consumption level and income level and disagreement on policy design between parts of the alcoholic beverage industries.

GROWING POINTS

Recent developments in the research highlight the importance of obtaining accurate alcohol price data, reducing bias in estimating price responsiveness, and examining the impact on the heaviest drinkers.

AREAS TIMELY FOR DEVELOPING RESEARCH

There is a need for further research focusing on the substitution effects of taxation and pricing policies, estimation of the true tax pass-through rates, and empirical analysis of the supply-side response (from alcohol producers and retailers) to various alcohol pricing strategies.

Which cost of alcohol? What should we compare it against?

This paper explores and develops issues raised by recent debates about the cost of alcohol to England and Wales. It advances two arguments. First, that the commonly used estimates for alcohol harm in England and Wales are outdated, not fully reliable and in need of revisiting. These estimates rely on data that are between 4 and 12 years out of date and sensitive to questionable assumptions and methodological judgements. Secondly, it argues that policymakers, academics and non-governmental organizations should be more careful in their use of these numbers. In particular, it is imperative that the numbers quoted fit the argument advanced. To help guide such appropriate usage, the different types of cost of alcohol are surveyed, alongside some thoughts on the questions they help us to answer and what they imply for policy. For example, comprehensive estimates of the total social cost of alcohol provide an indication of the scale of the problem, but have limited policy relevance. External cost estimates represent a 'lowest common denominator' approach acceptable to most, but require additional assumptions to guide action. Narrower perspectives, such as fiscal, economic or health costs, may be relevant in specific contexts. However, optimal policy should take a holistic view of all the relevant costs and benefits. Similarly, focusing solely on tangible costs may be less controversial, but will result in an under-estimate of the relevant costs of alcohol.

Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

BACKGROUND AND AIMS

Effective use of alcohol duty to reduce consumption and harm depends partly on retailers passing duty increases on to consumers via price increases, also known as 'pass-through'. The aim of this analysis is to provide evidence of UK excise duty and sales tax (VAT) pass-through rates for alcohol products at different price points.

SETTING

March 2008 to August 2011, United Kingdom.

DESIGN AND MEASUREMENTS

Panel data quantile regression estimating the effects of three duty changes, two VAT changes and one combined duty and VAT change on UK alcohol prices, using product-level supermarket price data for 254 alcohol products available weekly. Products were analysed in four categories: beers, ciders/ready to drink (RTDs), spirits and wines.

FINDINGS

Within all four categories there exists considerable heterogeneity in the level of duty pass-through for cheaper versus expensive products. Price increases for the cheapest 15% of products fall below duty rises (undershifting), while products sold above the median price are overshifted (price increases are higher than duty increases). The level of undershifting is greatest for beer [0.85 (0.79, 0.92)] and spirits [0.86 (0.83, 0.89)]. Undershifting affects approximately 67% of total beer sales and 38% of total spirits sales.

CONCLUSIONS

Alcohol retailers in the United Kingdom appear to respond to increases in alcohol tax by undershifting their cheaper products (raising prices below the level of the tax increase) and overshifting their more expensive products (raising prices beyond the level of the tax increase). This is likely to impact negatively on tax policy effectiveness, because high-risk groups favour cheaper alcohol and undershifting is likely to produce smaller consumption reductions.

Do alcohol excise taxes affect traffic accidents? Evidence from Estonia

OBJECTIVE

This article examines the association between alcohol excise tax rates and alcohol-related traffic accidents in Estonia.

METHODS

Monthly time series of traffic accidents involving drunken motor vehicle drivers from 1998 through 2013 were regressed on real average alcohol excise tax rates while controlling for changes in economic conditions and the traffic environment. Specifically, regression models with autoregressive integrated moving average (ARIMA) errors were estimated in order to deal with serial correlation in residuals. Counterfactual models were also estimated in order to check the robustness of the results, using the level of non-alcohol-related traffic accidents as a dependent variable.

RESULTS

A statistically significant (P <.01) strong negative relationship between the real average alcohol excise tax rate and alcohol-related traffic accidents was disclosed under alternative model specifications. For instance, the regression model with ARIMA (0, 1, 1)(0, 1, 1) errors revealed that a 1-unit increase in the tax rate is associated with a 1.6% decrease in the level of accidents per 100,000 population involving drunk motor vehicle drivers. No similar association was found in the cases of counterfactual models for non-alcohol-related traffic accidents.

CONCLUSIONS

This article indicates that the level of alcohol-related traffic accidents in Estonia has been affected by changes in real average alcohol excise taxes during the period 1998-2013. Therefore, in addition to other measures, the use of alcohol taxation is warranted as a policy instrument in tackling alcohol-related traffic accidents.

Understanding heterogeneity in price elasticities in the demand for alcohol for older individuals

This paper estimates the price elasticity of demand for alcohol using Health and Retirement Study data. To account for unobserved heterogeneity in price responsiveness, we use finite mixture models. We recover two latent groups, one is significantly responsive to price, but the other is unresponsive. The group with greater responsiveness is disadvantaged in multiple domains, including health, financial resources, education and perhaps even planning abilities. These results have policy implications. The unresponsive group drinks more heavily, suggesting that a higher tax would fail to curb the negative alcohol-related externalities. In contrast, the more disadvantaged group is more responsive to price, thus suffering greater deadweight loss, yet this group consumes fewer drinks per day and might be less likely to impose negative externalities.

Prevention of alcohol misuse among children, youths and young adults

BACKGROUND

Despite many activities to prevent risky alcohol consumption among adolescents and young adults there is an increase of alcohol intoxications in the group of ten to twenty year old juveniles.

OBJECTIVES

This report gives an overview about the recent literature as well as the German federal prevention system regarding activities concerning behavioral and policy prevention of risky alcohol consumption among children, adolescents and young adults. Furthermore, effective components of prevention activities are identified and the efficiency and efficacy of ongoing prevention programs is evaluated.

METHODS

A systematic literature review is done in 34 databases using Bool'sche combinations of the key words alcohol, prevention, treatment, children, adolescents and young adults.

RESULTS

401 studies were found and 59 studies were selected for the health technology assessment (HTA). Most of the studies are done in USA, nine in Germany. A family strengthening program, personalized computer based intervention at schools, colleges and universities, brief motivational interventions and policy elements like increase of prices and taxes proved effective.

DISCUSSION

Among the 59 studies there are three meta-analyses, 15 reviews, 17 randomized controlled trials (RCT) and 18 cohort studies. Despite the overall high quality of the study design, many of them have methodological weaknesses (missing randomization, missing or too short follow-ups, not clearly defined measurement parameters). The transferability of US-results to the German context is problematic. Only a few prevention activities reach a sustainable reduction of frequency and/or amount of alcohol consumption.

CONCLUSION

The HTA-report shows the need to develop specific and target group focused prevention activities for the German situation. Essential for that is the definition of target goals (reduction of consumption, change of behaviour) as well as the definition and empirical validation of risky alcohol consumption. The efficacy of prevention activities should be proven before they are launched. At present activities for the reduction or prevention of risky alcohol consumption are not sufficiently evaluated in Germany concerning their sustainable efficacy.