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Australia: Increasing tax on alcohol key to reducing consumption, says study

Australia: Increasing tax on alcohol key to reducing consumption, says study


Source: The Age

January 11, 2016


Increasing the cost of the cheapest alcohol could reduce consumption by nearly 12 standard drinks a week for low-income wine consumers, a new Monash University study says.


Called Are Alcohol Taxation and Pricing Policies Regressive? Product-Level Effects of a Specific Tax and a Minimum Unit Price for Alcohol, the study was conducted by Brian Vandenberg and Anurag Sharma.


Mr Vandenberg, who is at the Centre for Health Economics, said the study took a year to complete.


It analysed the alcohol consumption habits of 885 Victorian households, including what they spent on alcohol and how it was taxed.


“We got …consumers in Victoria to scan at home all the barcodes of all the alcohol products they purchased,” Mr Vandenberg said.


“We looked at whether or not alcohol taxes are regressive which means …whether or not low income people spend a higher proportion of income compared to high income persons.”


Mr Vandenberg said the study revealed that the current taxation of alcohol led to a huge difference between the amount of tax paid per standard drink on different products.


But he said adopting an alternative approach to taxing beer and wine would increase the price of the cheapest alcohol, which in turn would affect consumer habits.


“In Australia the tax on wine and cider is currently based on the value of the product (known as ad valorem), whereas 16 different tax rates are applied for beer, spirits and other alcohol,” he said.


“As a result, there are large discrepancies between the amounts of tax paid per standard drink across product types.


“The greatest inconsistency exists for cheap bulk wine which is taxed only 4 cents per standard drink, compared with regular strength beer which is taxed 46 cents per standard drink.”


Mr Vandenberg said two different tax-policy alternatives of either setting a minimum price of $1 per standard drink, or taxing all products based on alcohol content would see an increase in the price of cheap wine.


“Alcohol tax should be calculated according to alcohol content, with higher taxes applied to products with bigger alcohol volumes,” he said.


“Just based on that policy, the price of a four litre cask wine would increase 140 per cent from $12.38 to $29.75.


“Research shows consumers are price sensitive, so we estimate [based on studies on price responsiveness] that the increase would lead to a reduction in the amount of alcohol consumed by 11.9 standard drinks per week for low-income wine consumers.”


The alternative methods would also increase tax revenue which would help offset the social cost of alcohol, estimated to be $35 billion annually, he said.


The study has got the backing of Cancer Council Victoria’s chief executive Todd Harper who said excessive alcohol consumption led to throat, bowel and breast cancer.


Mr Harper said increasing the price of cheap alcohol through the taxation system was one of the most effective ways to reduce alcohol-related harms, including cancer.


“Heavy alcohol consumption is responsible for major harms in our community, including cancer of the mouth and throat, bowel in men and breast in women,” he said.


“Each year 3000 cases of cancer in Australia are attributed to the long-term consumption of alcohol.


“When alcohol prices are increased through taxation, consumers drink less, and reduce their risk of developing certain types of cancer.”


Mr Harper urged the federal government to consider the findings of the study.


“This research shows that there are some simple steps which can be taken to fix the alcohol tax system and reduce the harm caused by heavy drinking”, he said.


A spokesperson for Treasurer Scott Morrison said the government was engaged in a discussion on taxation “so we can ensure we better assist Australians to work, save and invest”.