Alcohol taxes: do the poor pay more than the rich?

Equity in household spending on alcoholic beverages in South Africa: assessing changes between 1995 and 2011

BACKGROUND

Globally, alcohol consumption accounts for a substantial burden of disease, which translates into high social and economic costs. To address this burden, several policies (e.g. age and trading hour restrictions, increasing alcohol taxation) were implemented. Despite the existence of these policies evidence shows that alcohol misuse and alcohol-related harms have increased in South Africa over recent years. The objective of this paper is to assess progressivity and the changes in progressivity of alcohol expenditure at the household level in South Africa using datasets that span 15 years.

METHODS

Data come from the 1995, 2000, 2005/06 and 2010/11 South Africa Income Expenditure Survey. Distribution of spending on alcoholic beverages were analyzed using standard methodologies. Changes in progressivity between 1995 and 2000, and between 2005/06 and 2010/11 were also assessed using the Kakwani index.

RESULTS

Alcohol spending was regressive between 1995 and 2011 as the fraction of poorer households' expenditure spent on alcohol beverage exceeds that for the richest households. Also, the difference in Kakwani indexes of progressivity indicates that spending on alcoholic beverages has become less regressive between the same time periods.

CONCLUSION

The results show no evidence that alcohol policy including taxation increased regressivity. Thus, there is an opportunity to further reduce the regressivity using coherent alcohol policies. This paper concludes that there is a need for further research to unpack why alcohol spending became less regressive over the years that goes beyond just looking at changes in the distribution of alcohol expenditure.

Alcohol Policy: Gaps between Legislative Action and Current Research

This paper compares alcohol policies under debate in U.S. state legislatures with policies that have been the focus of research attention. We reviewed the research literature to identify empirical studies of each policy and types of outcome variables analyzed. The two most evaluated alcohol control policies are the minimum legal drinking age and excise tax. Eight other policies had 20 or more studies evaluating them. The remaining alcohol policies received little attention in the research literature. Alcohol consumption and traffic crashes were the most frequent outcomes used in alcohol policy studies. Most studies evaluated policy changes at the state or national level, with few studies of local or institutional policies. During 1997 some 463 alcohol control bills were introduced at state legislatures. Many specific alcohol policies under debate in state legislatures have little research evidence to guide policy decision-making, pointing to areas where future research is needed.

Are Alcohol Taxation and Pricing Policies Regressive? Product-Level Effects of a Specific Tax and a Minimum Unit Price for Alcohol

AIMS

To compare estimated effects of two policy alternatives, (i) a minimum unit price (MUP) for alcohol and (ii) specific (per-unit) taxation, upon current product prices, per capita spending (A$), and per capita consumption by income quintile, consumption quintile and product type.

METHODS

Estimation of baseline spending and consumption, and modelling policy-to-price and price-to-consumption effects of policy changes using scanner data from a panel of demographically representative Australian households that includes product-level details of their off-trade alcohol spending (n = 885; total observations = 12,505). Robustness checks include alternative price elasticities, tax rates, minimum price thresholds and tax pass-through rates.

RESULTS

Current alcohol taxes and alternative taxation and pricing policies are not highly regressive. Any regressive effects are small and concentrated among heavy consumers. The lowest-income consumers currently spend a larger proportion of income (2.3%) on alcohol taxes than the highest-income consumers (0.3%), but the mean amount is small in magnitude [A$5.50 per week (95%CI: 5.18-5.88)]. Both a MUP and specific taxation will have some regressive effects, but the effects are limited, as they are greatest for the heaviest consumers, irrespective of income. Among the policy alternatives, a MUP is more effective in reducing consumption than specific taxation, especially for consumers in the lowest-income quintile: an estimated mean per capita reduction of 11.9 standard drinks per week (95%CI: 11.3-12.6).

CONCLUSION

Policies that increase the cost of the cheapest alcohol can be effective in reducing alcohol consumption, without having highly regressive effects.

Alcohol Prices, Beverage Quality, and the Demand for Alcohol: Quality Substitutions and Price Elasticities

BACKGROUND

Although the published literature on alcohol beverage taxes, prices, sales, and related problems treats alcoholic beverages as a simple good, alcohol is a complex good composed of different beverage types (i.e., beer, wine, and spirits) and quality brands (e.g., high-, medium-, and low-quality beers). As a complex good, consumers may make substitutions between purchases of different beverage types and brands in response to price increases. For this reason, the availability of a broad range of beverage prices provides opportunities for consumers to mitigate the effects of average price increases through quality substitutions; a change in beverage choice in response to price increases to maintain consumption.

METHODS

Using Swedish price and sales data provided by Systembolaget for the years 1984 through 1994, this study assessed the relationships between alcohol beverage prices, beverage quality, and alcohol sales. The study examined price effects on alcohol consumption using seemingly unrelated regression equations to model the impacts of price increases within 9 empirically defined quality classes across beverage types. The models enabled statistical assessments of both own-price and cross-price effects between types and classes.

RESULTS

The results of these analyses showed that consumers respond to price increases by altering their total consumption and by varying their brand choices. Significant reductions in sales were observed in response to price increases, but these effects were mitigated by significant substitutions between quality classes.

CONCLUSIONS

The findings suggest that the net impacts of purposeful price policy to reduce consumption will depend on how such policies affect the range of prices across beverage brands.