The Pass-Through of Alcohol Excise Taxes to Prices in OECD Countries
Research article
Abstract
Introduction
Tax pass-through rates to prices measure how much prices increase when taxes are increased by one unit, which will in turn determine the effectiveness of taxation policies in reducing substance use.
Method and Results
Using longitudinal data of alcohol prices and excise taxes from 27 Organization for Economic Cooperation and Development (OECD) countries from 2003 to 2016, this study estimate the tax pass-through rates to prices for a variety of alcoholic beverages—beer (1.24; 95% CIs: [0.67, 1.81]), wine (2.4; 95% CIs: [1.7, 3.11]), Cognac (1.71; 95% CIs: [1.07, 2.35]), Gin (0.85; 95% CIs: [0.34, 1.35]), Scotch whisky (1.14; 95% CIs: [0.52, 1.75]), and Liqueur Cointreau (1.98; 95% CIs: [1.21, 2.76]).
Conclusions
While excise taxes on wine, Cognac, and Liqueur Cointreau are over-shifted to prices, taxes on Gin are exact- or under-shifted. Excise taxes on beer and Scotch whisky are likely over-shifted to prices, but the tax pass-through rates for these beverages are not significantly different from 1 and the study cannot completely rule out exact pass-through of taxes to prices. The tax pass-through to prices for most beverage types is also higher for higher-priced products. Dynamic model further shows a lagged impact of wine and beer taxes on prices, indicating pricing strategies that may target lower-priced beer and wine.
