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A tale of two taxes

The costs associated with alcohol to the Australian taxpayer wouldn’t be new to GrogWatch readers — $15.3 billion, according to Collins and Lapsley’s report, which looked at 2004-2005 data.  One could assume that over time these costs would’ve increased, due to CPI and increased alcohol consumption at risky levels.

GrogWatch has been reporting for some time that the tax our government collects from alcohol sales is around $7 billion per year, which doesn’t even come close to covering the cost of the harms it causes.

Last week the Federal Government released its report, highlighting that the tax take figure is now $6 billion, which makes the gap between cost and harm even greater.

The report outlines that the tax for alcohol is complex. There’s one tax based on the quantity of alcohol sold and the other is based on value (known as the wine equalisation tax).

There is strong evidence – both in Australia and internationally – to show that the price of alcohol influences alcohol consumption and related harms. Consumers are responsive to changes in price: when the cost of alcohol increases, consumption is reduced and harms decrease. The effect is seen across all groups, including young drinkers, risky drinkers and harmful drinkers (WHO, 2007; Babor et al, 2010).

Raising the price of alcohol through the taxation system has been shown to be highly effective for reducing harm (Meier et al, 2008a). These harms include:

  • road traffic accidents and fatalities among people of all ages, but particularly younger drivers
  • cirrhosis deaths
  • male suicides, particularly among young adults
  • alcohol-related sudden deaths
  • intentional and unintentional injuries
  • workplace injuries
  • sexually transmitted infections
  • crimes such as rapes, robberies, homicides, crime, child abuse, domestic abuse
  • violence at universities
  • violence-related injuries.

Alcohol taxation is also highly cost-effective. Australian researchers Collins and Lapsley (2008) estimated that appropriately increased levels of alcohol taxation could reduce the total social costs of alcohol by between $2.2 and $5.9 billion per year. These estimates are based on 2004/05 prices so reductions in today’s terms could be higher.

It’s important to note that alcohol taxation on its own is not the silver bullet for reducing alcohol-related harm. Other evidence-based measures include controls on alcohol marketing, restricting physical availability, and effective liquor licensing.