1. Part One- Alcohol Policy and Public Health
Module 6- Introduction to the effectiveness of policies: Controlling the affordability of alcohol
MODULE 6 focuses on the research evidence related to controlling the affordability of alcoholic beverages .
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2. Learning Objectives
Upon completion of this module you will be able to:
Provide a brief overview on the assessment of various alcohol policies
Describe aims, mechanisms and effects of alcohol taxation and pricing
This module provides an overview on the assessment undertaken in the scientific literature of various alcohol policies and considers the aims, mechanisms, and effects of alcohol taxation and pricing, two important economic strategies that have strong implications for the prevention of alcohol-related problems.
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3. Evaluating the Evidence for Effective Policies
Evidence of Effectiveness – the quality of scientific information
Breadth of Research Support – quantity and consistency of the evidence
Tested Across Cultures – e.g. countries, regions, subgroups
Rating Scale: 0, +, ++, +++, (?)
Recent reviews of the scientific literature and book-length policy analyses provide a way to evaluate the effectiveness of strategies and interventions used by local and national governments in the control or amelioration of alcohol-related problems throughout the world . This slide describes the criteria used by an expert consensus panel that rated 31 alcohol policy options in terms of evidence of effectiveness, breadth of research support and cross-cultural generalizability. After reviewing the scientific evidence supporting each policy option, ratings were obtained by policy experts on a four point scale ranging from zero to three plusses. For example, a rating of three plusses on the effectiveness scale indicates there is very good evidence that the intervention or strategy has a significant impact on hazardous alcohol consumption and alcohol-related problems. The results, which will be summarized in the subsequent modules, indicate that there are a variety of effective policy options that can be used to guide alcohol policy, but some popular strategies (e.g., alcohol education in schools) have little or no empirical support, whereas some unpopular options (e.g., alcohol taxes) have good supporting evidence, but are rarely used for public health purposes.
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4. Alcohol Taxation and Pricing
Contribute to governmental financial resources
Tradition of custom tariffs on alcohol imports and excise duties on domestic production
Reduce harm from drinking
Among the various measures by which nations have tried to reduce alcohol-related problems, the most common one is the regulation of alcohol taxes and prices. This is in part because governments need financial resources and mostly acquire them by taxation, including taxes on alcohol. There are long national traditions of customs tariffs on alcohol imports and excise duties on domestic production. As alcohol production became more commercial and centralised, collecting the taxes became easier. For more than a century, taxation of alcoholic beverages has also been used by governments to reduce rates of harm from drinking. Economic studies conducted in many developed and some developing regions of the world have demonstrated that increased alcohol taxes and prices are related to reductions in alcohol use and related problems.
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5. Assumptions Underlying Alcohol Taxation and Other Price Controls
POLICY
ASSUMPTION
High taxes and prices
Reduce demand by increasing economic cost of alcohol relative to alternative commodities
The assumption implied in pricing and taxation policies is that increasing the price of alcohol will lead to a reduction of consumption because it does increase the cost of alcohol relative to other alternative commodities or products which can be purchased for the same price.
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6. Taxing Alcoholic Beverages
Distilled spirits generally taxed at a higher rate than beer or wine
Low-alcohol-content beer taxed at a lower rate to promote moderate drinking in some countries
Minimum prices on alcohol in Canada have a public health function
The relative price of alcohol has declined with taxes not keeping up with inflation
Alcoholic beverages are viewed as especially suitable commodities for taxation because of their detrimental social and public health consequences. In many countries, alcohol taxation systems incorporate varying tax rates for different beverage categories. Usually, this entails higher tax rates per litre of alcohol for distilled spirits than for wine or beer, reflecting particular concerns relating to spirits consumption but also the fact that production and distribution costs per centilitre of alcohol are lower for distilled spirits than for wine and beer. In some countries, very low alcohol content beverages have been taxed at very low rates (or not taxed as alcohol at all), to encourage their consumption ahead of higher alcohol alternatives. In some places, price fixing and minimum pricing requirements are also allowed or imposed, which restrict pricing choices in the alcohol market. In Canada, for instance, minimum price levels set by the provinces of Quebec and Ontario for beer have been justified as contributing to public health and order. In many countries real prices for alcoholic beverages have declined substantially since A major cause of this decline is that excise duties are commonly set a fixed amount of the local currency, so that inflation automatically reduces their value, unless there is new legislation to set a new tax level.
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7. Taxing “Alcopops”
Special taxes on ‘alcopops’ (premixed sweetened alcoholic beverages) to protect adolescents
 Sweet taste attractive to young people, marketing has targeted youth
Studies have found substantial reductions in consumption of these beverages
A number of countries have imposed special taxes on ‘alcopops’ (premixed sweetened beverages, also known as pre-mixed spirits, ready-to-drink spirits, or designer drinks) following concerns about their popularity with young drinkers. In recent years, there has been growing concern about the role of alcopops in youth alcohol consumption and related harms. There is some evidence that the sweet taste of these drinks is attractive to young people and that the marketing of them has targeted youth. In recent years a number of countries have increased taxes on alcopops in attempts to reduce risky drinking, particularly amongst young people. Studies have found substantial reductions in consumption of these beverages. The evidence suggests that increases in the price of alcopops result in reductions in consumption of these beverages.
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8. Discounting and Minimum Pricing
Discount drink promotions:
On-premises settings: happy hours (periods of time in which alcohol is sold at low prices)
Supermarkets: alcohol heavily discounted to encourage people into a store
Discount drink promotions increase alcohol consumption and patron intoxication
Raising the minimum price of the cheapest beverages is effective in influencing heavy drinkers and reducing rates of harm
The discounting of alcoholic beverages has raised concerns in a number of ways. In on-premises settings, alcohol discounting usually takes the form of happy-hours, periods of time in which alcohol is sold at low prices. There is some evidence that these kinds of promotions increase alcohol consumption. Two studies by Thombs and colleagues demonstrate significant associations between patron intoxication and drink specials, particularly ‘all-you-can-drink’ specials. Some jurisdictions have restricted or banned happy-hour style promotions, there has been little research into the effects these restrictions have. In off-premises settings, particularly when sold in chain grocery stores, alcohol is often heavily discounted to encourage people into a store, acting as a loss leader. In the United Kingdom, the use of alcohol products as loss leaders has been widespread, with grocery stores regularly selling alcohol at below-cost prices. Studies have shown that changes in the price of the cheapest alcohol products have the most impact on consumption, suggesting that setting a minimum alcohol price could be an effective method for reducing alcohol-related harm. While somewhat limited, the evidence suggests that raising the minimum price of the cheapest beverages is effective in influencing heavy drinkers and reducing rates of harm.
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9. Income, Economic Conditions and Alcohol Consumption
Alcohol consumption increases with income
Drinking rises when the economy booms and declines during economic recessions
Prices are most effective at reducing consumption when aggregate income is low
Even if alcohol taxes are fiscally regressive, increased taxes may reduce inequalities through more substantial health benefits for disadvantaged people
Economic theory suggests that broader economic conditions have an impact on alcohol consumption. It is well-established that alcohol consumption increases with income, and that drinking rises when the economy booms and declines during economic recessions. There is some evidence that prices are most effective at reducing consumption when aggregate income is low. It has often been suggested that alcohol taxes are regressive, that is, they have greater fiscal impact on the poor than the rich. There remains some debate around the extent of this disparity, in part because abstention from alcohol is more common among the poor. Even if alcohol taxes are fiscally regressive, increased taxes may reduce overall inequalities through more substantial health impacts on economically disadvantaged people. This reduction in health inequalities results from the poor altering their consumption more than the rich when prices change.
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10. Rate of Quarterly Alcohol-Related Disease Mortality Per 100,000 population aged 15 years and older. Alaska,
2002 tax increase
1983 tax increase
A study in the U.S. state of Alaska found that alcohol excise tax increases in 1983 and 2002 were each associated with substantial reductions in alcohol-related disease mortality. These effects immediately followed the excise increases and were sustained over the entire study period, resulting in reductions in alcohol-related mortality of between 11% and 29%.
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Source: Wagenaar et al. (2009)

11. Price Effects for Particular Groups of Drinkers
Price increases reduce heavy episodic or binge drinking among youth
Alcohol tax increases also reduce mortality from alcohol-related liver disease, suicide, homicide, traffic fatalities and sudden deaths
It is often asked whether heavy drinkers are responsive to changes in alcohol prices. There is a substantial body of evidence, predominantly from the United States, examining the impact of alcohol price on young drinkers, with studies consistently finding that changes in alcohol price were related to changes in youth drinking. Some studies have shown that price increases reduce heavy episodic or binge drinking among youth. The extent to which adult heavy and problematic drinkers are responsive to changes in alcohol prices has also been studied. Studies of cirrhosis mortality have found that tax increases reduce mortality and thus impact on the consumption of the heaviest drinkers in society. Alcohol tax increases also reduce mortality from alcohol-related suicide, homicide, traffic fatalities and alcohol-related sudden deaths.
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12. Summary: Pricing and Taxation
Strategy Or Intervention
Effectiveness
Research Support
Cross-national Testing
Alcohol Taxes
+++
Minimum price ? +
Bans on price discounts and promotions
Differential price by beverage
Special or additional taxation on youth-oriented beverages
There is very substantial evidence supporting the general proposition that higher alcohol taxes can reduce alcohol-related problems. The research has been conducted in many countries with similar results. There is less evidence for the effectiveness of minimum price increases and bans on discounts and price promotions, but the existing findings are consistent with the proposition that price affects alcohol consumption. Alcohol pricing has been found to be an effective way to shift consumption from one type of beverage to another, and to discourage risky drinking in young persons.
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13. Summary Economic theory and scientific evidence suggest that:
People increase their drinking when prices are lowered, and decrease their consumption when prices rise.
Adolescents and problem drinkers are no exception to this rule.
Like other commodities, the consumption of alcoholic beverages is responsive to price. In general, alcohol consumption increases when prices are lowered, and decreases when prices are increased. Heavy drinkers are affected by taxes and prices of alcoholic beverages as much as other drinkers.
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14. Summary, cont.
Increased alcohol taxes and prices are related to reductions in alcohol-related problems, including crime, traffic accidents and mortality rates.
Alcohol taxes are an attractive instrument of alcohol policy because they can be used both to generate direct revenue and to reduce alcohol-related harm.
The most important downside to raising alcohol taxes is smuggling and illegal in-country alcohol production.
In addition, economic studies demonstrate that increased alcoholic beverage taxes and prices are related to reductions in alcohol-related problems. Tax increases have been shown to affect rates of cirrhosis mortality, drink-driving deaths, and violent crime. Because the proportional decrease in consumption is typically less than the proportional increase in taxes, alcohol taxes are an attractive instrument of alcohol policy. They can be used both to generate direct revenue and to reduce alcohol-related harm. But the effectiveness of alcohol taxes in reducing alcohol-related problems can be neutralized to some extent by increases in smuggling and illegal alcohol production. In certain parts of South America (e.g., Brazil), as much as 60% of the alcohol production may go unrecorded and government control is exercised only over parts of the alcohol market. The establishment of efficient mechanisms to control the market and collect taxes has become an important public health priority if taxation is to be used as an instrument of alcohol policy.
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15. REFLECTION
Discuss taxation and real prices of each type of alcoholic beverage from your country:
Do you think they work?
How do you know?
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