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The efficiency of a volumetric alcohol tax in australia

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The efficiency of a volumetric alcohol tax in australia. / Byrnes, J.; Petrie, D. J.; Doran, C.M.; Shakeshaft, A.

In: Applied Health Economics and Health Policy, Vol. 10, No. 1, 2012, p. 37-49.

Research output: Contribution to journalArticle

Harvard

Byrnes, J, Petrie, DJ, Doran, CM & Shakeshaft, A 2012, 'The efficiency of a volumetric alcohol tax in australia' Applied Health Economics and Health Policy, vol 10, no. 1, pp. 37-49.

APA

Byrnes, J., Petrie, D. J., Doran, C. M., & Shakeshaft, A. (2012). The efficiency of a volumetric alcohol tax in australia. Applied Health Economics and Health Policy, 10(1), 37-49doi: 10.2165/11594850-000000000-00000

Vancouver

Byrnes J, Petrie DJ, Doran CM, Shakeshaft A. The efficiency of a volumetric alcohol tax in australia. Applied Health Economics and Health Policy. 2012;10(1):37-49.

Author

Byrnes, J.; Petrie, D. J.; Doran, C.M.; Shakeshaft, A. / The efficiency of a volumetric alcohol tax in australia.

In: Applied Health Economics and Health Policy, Vol. 10, No. 1, 2012, p. 37-49.

Research output: Contribution to journalArticle

Bibtex - Download

@article{28059c05742547eea7f7da241aa27653,
title = "The efficiency of a volumetric alcohol tax in australia",
author = "J. Byrnes and Petrie, {D. J.} and C.M. Doran and A. Shakeshaft",
note = "Cited By (since 1996): 2 Export Date: 21 March 2012 Source: Scopus CODEN: AHEHA doi: 10.2165/11594850 Language of Original Document: English Correspondence Address: Doran, C.M.; University of Newcastle, King and Watt Streets, Newcastle, NSW 2300, Australia; email: christopher.doran@newcastle.edu.au",
year = "2012",
volume = "10",
number = "1",
pages = "37--49",
journal = "Applied Health Economics and Health Policy",
issn = "1175-5652",

}

RIS (suitable for import to EndNote) - Download

TY - JOUR

T1 - The efficiency of a volumetric alcohol tax in australia

A1 - Byrnes,J.

A1 - Petrie,D. J.

A1 - Doran,C.M.

A1 - Shakeshaft,A.

AU - Byrnes,J.

AU - Petrie,D. J.

AU - Doran,C.M.

AU - Shakeshaft,A.

PY - 2012

Y1 - 2012

N2 - Background: In Australia and elsewhere, fiscal measures such as alcohol taxation are a commonly used intervention and cost-effective strategy to reduce alcohol consumption and associated harm. However, alcohol taxation policies distort the market for alcohol, specifically increasing the marginal cost of alcohol. It is proposed that a volumetric tax, which taxes alcohol equally across all beverage types, is less distortive of consumer preferences and more efficient at reducing alcohol consumption than the current Australian tax model, where taxes are charged at varying amounts per litre of pure alcohol, depending on the beverage type. Objective: This paper quantifies the effect of four different alcohol taxation systems, relative to the current Australian system: two different types of volumetric taxation (deadweight loss neutral and tax revenue neutral); the recent strategy trialled in Australia of increasing the tax only on ready-to-drink alcoholic beverages (i.e. premixed spirits); and a tiered tax system, which may be more politically acceptable. Methods: A partial equilibrium approach was used to measure taxation revenue, consumer welfare and consumption in alcohol markets. Estimates of taxation revenue, consumer welfare and consumption were first calculated for 2008 and then compared with the four scenarios considered. Results: Relative to the previous alcohol taxation scheme in Australia, the taxation strategy that increased the tax solely on ready-to-drink alcoholic beverages increased taxation revenue by 479 million Australian dollars ($A), reduced pure alcohol consumption by 754 000 litres and increased the net deadweight loss of taxation by $A62 million. For a tax-neutral approach, for the same level of taxation revenue as is currently generated, a volumetric tax could substantially reduce the cost of taxation (as described by the net loss in consumer welfare) by $A177 million and reduce pure alcohol consumption by 468 000 litres. Under a deadweight loss-neutral scenario, for the same amount of deadweight loss generated from the previous taxation scenario, taxation revenue could be increased by $A1153 million, in addition to reducing pure alcohol consumption by 4 316 000 litres. A tiered taxation regime, as modelled here, could decrease pure alcohol consumption by 2 616 000 litres whilst increasing taxation revenue by $A1101 million. However, this scenario would also increase the deadweight loss of taxation by $A113 million. Conclusion: From these scenarios, it can be shown that, for the same tax revenue, consumer welfare can be reduced or, for the same level of loss to consumer welfare, taxation revenue can be increased. Both these scenarios result in a reduction of pure alcohol consumption.

AB - Background: In Australia and elsewhere, fiscal measures such as alcohol taxation are a commonly used intervention and cost-effective strategy to reduce alcohol consumption and associated harm. However, alcohol taxation policies distort the market for alcohol, specifically increasing the marginal cost of alcohol. It is proposed that a volumetric tax, which taxes alcohol equally across all beverage types, is less distortive of consumer preferences and more efficient at reducing alcohol consumption than the current Australian tax model, where taxes are charged at varying amounts per litre of pure alcohol, depending on the beverage type. Objective: This paper quantifies the effect of four different alcohol taxation systems, relative to the current Australian system: two different types of volumetric taxation (deadweight loss neutral and tax revenue neutral); the recent strategy trialled in Australia of increasing the tax only on ready-to-drink alcoholic beverages (i.e. premixed spirits); and a tiered tax system, which may be more politically acceptable. Methods: A partial equilibrium approach was used to measure taxation revenue, consumer welfare and consumption in alcohol markets. Estimates of taxation revenue, consumer welfare and consumption were first calculated for 2008 and then compared with the four scenarios considered. Results: Relative to the previous alcohol taxation scheme in Australia, the taxation strategy that increased the tax solely on ready-to-drink alcoholic beverages increased taxation revenue by 479 million Australian dollars ($A), reduced pure alcohol consumption by 754 000 litres and increased the net deadweight loss of taxation by $A62 million. For a tax-neutral approach, for the same level of taxation revenue as is currently generated, a volumetric tax could substantially reduce the cost of taxation (as described by the net loss in consumer welfare) by $A177 million and reduce pure alcohol consumption by 468 000 litres. Under a deadweight loss-neutral scenario, for the same amount of deadweight loss generated from the previous taxation scenario, taxation revenue could be increased by $A1153 million, in addition to reducing pure alcohol consumption by 4 316 000 litres. A tiered taxation regime, as modelled here, could decrease pure alcohol consumption by 2 616 000 litres whilst increasing taxation revenue by $A1101 million. However, this scenario would also increase the deadweight loss of taxation by $A113 million. Conclusion: From these scenarios, it can be shown that, for the same tax revenue, consumer welfare can be reduced or, for the same level of loss to consumer welfare, taxation revenue can be increased. Both these scenarios result in a reduction of pure alcohol consumption.

KW - Alcohol-use

KW - Health-policy.

KW - alcohol consumption

KW - alcohol tax

KW - alcoholic beverage

KW - article

KW - Australia

KW - beer

KW - consumer advocacy

KW - cost effectiveness analysis

KW - cost utility analysis

KW - economic aspect

KW - health care system

KW - mathematical analysis

KW - mathematical model

KW - outcome assessment

KW - public health service

KW - tax

KW - wine

U2 - 10.2165/11594850-000000000-00000

DO - 10.2165/11594850-000000000-00000

M1 - Article

JO - Applied Health Economics and Health Policy

JF - Applied Health Economics and Health Policy

SN - 1175-5652

IS - 1

VL - 10

SP - 37

EP - 49

ER -

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