The World Health Organization (WHO) released new data revealing low levels of taxation on unhealthy products universally. This includes health harmful products such as alcohol and sugar sweetened beverages (SSBs).
The finding highlights how little tax is utilized as a tool to prevent and reduce harm from these products.
The WHO has also released a technical manual on alcohol tax policy and administration to support countries in developing and implementing public health oriented alcohol taxation to lower the alcohol burden.
This manual complements existing tax manuals on products such as tobacco and SSBs.
Global harm from alcohol and SSBs and the potential of health taxes
Every year, 2.6 million people lose their lives to alcohol worldwide. 8 million lives are further lost due to unhealthy diets. Taxing alcohol and SSBs can decrease the number of lives lost drastically.
108 countries of WHO’s member states tax certain types of sugar-sweetened beverages. However, on average excise taxes represent just 6.6% of the price of soda. On the other hand, half of all countries that tax SSBs also tax water as a commodity. This is not a practice recommended by the WHO.
According to the report, excise taxes should apply to all alcoholic beverages. As of July 2023, at least 148 countries worldwide apply national-level excise taxes to at least on type of alcoholic beverages. However, not all types of alcoholic beverages are subject to excise taxes. For example, at least 22 countries do not apply excise taxes to wine.
Key findings of the global report on the use of alcohol taxes
The key findings of the report can be summarised as follows:
- More than half of excise tax systems applied to beer and spirits apply a uniform rate, not based on alcohol content.
- Approximately half of countries apply excise taxes for beer and three out of five countries apply excise taxes for spirits based on alcohol content.
- The majority of ad valorem excise taxes are applied on the producer (manufacturer) price.
- Applying excise taxes based on a value set closer to the retail price can better impact retail prices and be less prone to industry price manipulation.
- Volume-based specific excise taxes are the most prevalent type of excise tax systems applied to beer and wine. Alcohol-content based specific excise tax systems are the most prevalent for spirits.
- Volume-based specific excise taxes are the most effective and easiest to implement in raising prices of the cheapest alcoholic beverages.
- 21 countries earmark their alcohol tax revenue towards health programmes.
- Globally, the median excise tax share and median total tax share are 13.4% and 29% for 330ml of the most sold brand of beer.
- Only 23.1% of countries applying specific excise tax systems mandate their regular automatic adjustment.
- On average, the excise tax level per 10 g of ethanol is higher for beer than for spirits in all WHO regions, except the European Region.
Alcohol enjoys significantly low tax rates despite extensive harm caused in consumption
At least 148 countries implement excise taxes on alcoholic products on the national level. Curiously enough, wine is exempted from excise duties in at least 22 countries. Most of these countries are in the European region.
On average, the global excise tax share in the price of the most sold brand of beer amounts to 17.2%. The most sold brand of the most sold spirits type has an average tax share of 26.5% of its price.
Taxing such health harmful products has the potential to create healthier populations wherever they are implemented. Dr Rüdiger Krech, Director for Health Promotion at the WHO attested to the potential of alcohol taxation to create a positive ripple effect across society.
Taxing unhealthy products creates healthier populations. It has a positive ripple effect across society – less disease and debilitation and more revenue for governments to provide public services. In the case of alcohol, taxes also help prevent violence and road traffic injuries.”
Dr Rüdiger Krech, Director for Health Promotion, World Health Organization
Real world example of alcohol tax benefits: Lithuania
Lithuania presents a real-world case study for this potential. The government increased alcohol taxes in 2017 to lower population-level alcohol consumption and prevent and reduce alcohol harm. This led to an increase of alcohol tax revenue from €234 million in 2016 to €323 million in 2018. During this time, the country saw alcohol-related deaths drop from 23.4 per 100,000 people in 2016 to 18.1 per 100,000 people in 2018.
A study conducted in 2017 also showed that implementing taxes to raise alcohol prices by 50% would avert over 27 million deaths over 50 years. It would also generate close to US$ 17 trillion worth of tax revenue that can be directed towards the welfare of the public. US$ 17 trillion is equivalent to the total government revenue of the world’s eight largest economies in a year.
Key policy formulation advice from the WHO technical manual on alcohol tax policy
The technical manual offers guidance under six key subheadings for governments seeking to implement effective alcohol tax policies.
Tax policy
- Excise tax increases should be used to achieve the public health goal of reducing demand for alcohol.
- Alcohol excise tax increases should be included as part of a comprehensive strategy to reduce alcohol consumption.
Tax design
- Tax structure matters, and taxes should be designed based on the local country context.
- Governments should consider differences between alcoholic beverages carefully when designing alcohol taxes.
- Governments should rely more on specific excise taxes than ad valorem excise taxes.
- Specific alcohol taxes should be adjusted automatically for inflation and income growth.
- Alcohol taxes should be increased regularly to reduce affordability over time.
- Alcohol content should be used as the tax base to generate incentives to reduce alcohol consumption in the population.
- Pricing policies could be used in conjunction with excise taxes to optimize tax policies.
Monitoring and evaluation
- Governments need to understand the national alcohol market, including the types of alcoholic beverages being consumed and the patterns of consumption.
- Policies should be monitored and evaluated to ensure that the most effective alcohol excise tax and pricing policies are implemented.
Tax administration
- Governments should have clear administrative systems in place to deal with alcoholic product heterogeneity.
- Institutional arrangements should be set in place for tax administration.
- Governments should ensure compliance and accuracy of information on the tax compliance cycle.
- Governments should ensure control and enforcement of the supply chain.
- Procedures to follow detection of unrecorded alcohol – and, specifically, illicit trade in alcohol – should be defined clearly.
Political economy
- Subsidies, tax incentives, loans and grants to support the alcohol supply chain should be avoided.
- Tax revenue should preferably be earmarked for public health enhancement.
The alcohol industry and corporate activities: industry arguments against alcohol tax and pricing policies
- Corporate activities to influence taxation and pricing policies should be managed and counteracted if necessary.
- Governments should not be swayed by arguments that alcohol tax and pricing policies will result in an increase in unrecorded alcohol.
- Industry threats of court and legal challenges to tax increases or reforms should not prevent governments improving tax policy.
- The industry often argues that alcohol tax and pricing policies are anti-poor or regressive, but governments should not allow these concerns to prevent alcohol tax and price increases.
- The industry argues that alcohol tax and pricing policies will result in revenue reduction, but governments should not let such fears prevent increases on alcohol excise taxes.
- Governments should not concern such as the impacts of alcohol tax and pricing policies on employment, which are overestimated, affect tax increases.
- Disinformation strategies employed by the industry to misrepresent health information on alcohol consumption, should not prevent governments from increasing excise taxes on alcoholic beverages.
Taxation of unhealthy products receive support worldwide
It is well established that the taxation of health harmful products helps reduce their consumption and related harms. The ensuing lower sales also encourage companies to produce healthier products instead. In the case of alcohol taxation, for example, raising alcohol excise taxes helps prevent injuries and NCDs, such as cancers, diabetes, and heart diseases.
Policies that benefit the public also receive community support worldwide. A recent Gallup Poll found that the majority of survey respondents across all countries supported tax increases on unhealthy products, such as alcohol and SBBs. The poll was conducted by the WHO in collaboration with Bloomberg Philanthropies. Taxing alcohol and SBBs is also the recommendation of the WHO.
At the WHO launch event of the alcohol taxation report and technical manual, Movendi International President Kristina Sperkova also expressed the community’s appreciation for WHO’s world-class guidance on alcohol tax policy.
This tool is fantastic and long awaited. Throughout the years we have seen growing attention to and interest in alcohol taxation. We have also seen a growing need for technical assistance and support in the whole process of setting up and implementing excise tax on alcohol. This manual can accelerate the work on public health-oriented alcohol taxation thus protect and promote health for all.”
Kristina Sperkova, International President, Movendi International
RESET Alcohol: tackling alcohol harm with high-impact solutions, especially alcohol taxation
Since September 2022, the RESET Alcohol Initiative brings together national governments, civil society, research organizations, and global leaders in public health and alcohol policy to develop and implement evidence-based alcohol policies from the WHO’s SAFER technical package – with a focus on the single most cost-effective alcohol policy solution, alcohol tax increases.
RESET Alcohol is providing technical support to civil society, governments, and research institutes in Sri Lanka, Philippines, Kenya, Brazil, Mexico, and Colombia to help foster policy change and better protect the populations from alcohol harm.
RESET Alcohol is a collaboration of six global organizations: Vital Strategies, which is leading the initiative; Movendi International; the University of Illinois Chicago; the Global Alcohol Policy Alliance (GAPA); the Non-Communicable Disease (NCD) Alliance; and the World Health Organization.
The importance of alcohol taxation
Alcohol taxation is the single most cost-effective alcohol policy solution. Movendi International provides more than 550 resource articles about alcohol taxation. Taxation helps reduce overall alcohol use and related harm, as well as heavy and high-risk alcohol use. For instance, young people and adult alcohol users engaging in heavy episodic alcohol use are exposed to serious health and social risks, as reflected in statistics on highway safety, injuries, violent crime, or domestic violence, according to the World Bank.
The accumulated research findings indicate that population-based policy options – such as the use of alcohol excise taxation to lower alcohol affordability, limiting alcohol availability and implementing bans on alcohol advertising – are the “best buys”.
In April 2023, a landmark study by the Copenhagen Consensus Center identified 30 cost-effective interventions to achieve the Sustainable Development Goals (SDGs) in the fastest way possible. Among these interventions, alcohol policy and especially alcohol taxation have been ranked as the second and third most effective intersectoral policies.
Implementing these measures could prevent 150,000 deaths caused by alcohol in the next ten years. For every dollar spent, a country could get back $76 worth of good things happening in society, while alcohol taxation alone can generate benefits worth $53 for every dollar spent.
Taxing alcohol, tobacco, and sugar-sweetened beverages is an effective but underutilized policy solution for promoting health and preventing disease. They could also assist in raising more funds for the government to support investments and programs that benefit the entire population and improve equity. Alcohol taxation is a win-win-win measure for public health and the economy specifically in recovering from the COVID-19 pandemic.
Citation
Global report on the use of alcohol taxes, 2023. Geneva: World Health Organization; 2023. Licence: CC BY-NC-SA 3.0 IGO.
WHO technical manual on alcohol tax policy and administration. Geneva: World Health Organization; 2023. Licence: CC BY-NC-SA 3.0 IGO.
Sources
Download the global report on the use of alcohol taxes
Download the WHO technical manual on alcohol tax policy
World Health Organization Media Release: “WHO calls on countries to increase taxes on alcohol and sugar sweetened beverages“
