New Year’s Eve brought more alcohol-related violence, again prompting claims — this time by Australian Drug Law Reform Foundation head Dr Alex Wodak — that alcohol is too cheap. That was the message in the lead-up to Christmas and one that is repeated predictably after every high-profile “king hit”.
But the effectiveness of tax in reducing binge drinking is not clear.
Cancer Council Victoria CEO Todd Harper says that for every 10% increase in in cost there is a 5% decrease in alcohol consumption. “The evidence of what works in reducing harm shows price is critical, the most important element,” he told Crikey.
But while overall consumption of alcohol is reduced when prices rise, research shows heavy drinkers merely reduce their consumption in between binges. A working paper cited in the same report found only two in 18 studies show heavy drinkers to be responsive to tax. So while overall consumption decreases, binge drinking among heavy drinkers does not.
Australia is a case in point. Since 1990, the price of alcohol has grown 16% above CPI, and overall rates of consumption are down. But as public health advocates are quick to tell you, binge drinking hasn’t abated.
The rates of tax Australians pay on beer and alcoholic beverages are among the highest in Organisation for Economic Co-operation and Development countries, according to the Australian Tax Office. According to a University of Adelaide study, beer and spirits are priced about seven times and twice the OECD unweighted averages, respectively.
Then there’s wine. Public Health Advocacy Institute director and Curtin University Professor Mike Daube told Crikey: “You can by wine at $2/$3 a litre … That’s cheaper than water.”
While other liquor is taxed based on alcohol content, wine is taxed based on value, meaning cheaper wine attracts less tax. That’s hardly unique, however. Other wine exporting countries also levy less tax on domestically produced wine than liquor and beer. Compared to those countries, Australia’s excise taxes on wine are not very low.
Source: University of Adelaide study
Daube, like other public health advocates, has been campaigning to bring about an end to the Wine Equalisation Tax, in part due to concerns about young people. “The reason for focusing heavily on tax and the WET in particular is that it can make so much difference,” he said. “When wine is that cheap, it’s going to make alcohol more accessible to young people.”
But few young people actually drink cheap wine. In fact, according to the Foundation for Alcohol Research and Education, the biggest consumers of cask wine are those aged 70 and older. For all the concern about young people and cask wine, less than 1% of 20- to 29-year-olds actually drink it.
Young people prefer spirits and ready-to-drink mixed beverages and drink more of those than beer or wine. That’s spirits and RTDs: the most expensive and highly taxed alcohol on the market.
What of binge drinkers? It seems they’re not that fond of wine, either, and prefer to drink beer and spirits:
Still, the push is on to introduce volumetric taxation of alcohol. In an email, Dr Alex Wodak told Crikey: “This is an economic issue as much as a public health and public order issue. Peter Costello used to say (repeatedly) as Treasurer that ‘alcohol tax in Australia is a dog’s breakfast — referring to the 40-odd different taxes on alcohol — that’s hardly efficient.”
The Henry Tax review also said Australia’s system of alcohol taxation “incoherent”. But it isn’t easy to raise the tax on wine. When the UK lifted taxes on alcohol, Treasury prices did not rise as quickly as duties, because supermarkets — which dominate the UK liquor market, as they do in Australia — were able to cost-shift to avoid the tax.
Changing the tax rate of all types of alcohol by applying a uniform volumetric tax isn’t that straightforward, either. Under that scenario mid-strength beer would become more expensive and RTDs cheaper.
Harper says a sliding scale of volumetric tax is needed to avoid this. Other groups, like the National Alliance for Action on Alcohol, also support a tiered system, but want to ensure that tax on every alcoholic product increases.
But Australia has something similar already, taxing full-strength beer at a higher rate than mid-strength and low-strength beer. Despite the tax penalty — and remember, Australia taxes beer at a higher rate than Europe, New Zealand, Canada and the United States — full-strength beer is still the drink of choice for binge drinkers, followed by spirits.
Campaigners say tax reform must be part of an overall solution, and are also targeting alcohol availability, access, advertising and education. Daube stresses there is no magic bullet, while Harper says increasing the price of booze is “not the total solution, but can play a part”.
Despite this caveat, Daube insists increasing tax on alcohol is an effective measure. “It’s an enormously complex problem with a raft of issues. But price certainly would affect some groups and the level of tax overall would clearly make a difference,” he said.
Despite a multi-pronged approach to curbing binge drinking, the message that has filtered into public discourse is that alcohol is too cheap and increasing tax, particularly on wine, will significantly reduce binge drinking. And Crikey says that’s mostly crap.