Alcohol taxation policy in Thailand: implications for other low- to middle-income countries
For debate
Background
Alcohol taxation and other alcohol policies in high-income countries aim mainly to reduce alcohol- attributable harms by reducing high-risk alcohol consumption in current alcohol consumers. The goal of preventing people from consuming alcohol at all is rarely formulated, whereas delay of initiation is a major focus of prevention.
Low- and middle-income countries not only aspire to reduce consumption and linked harm in alcohol consumers, but are equally in need of alcohol taxation policies directed towards preventing initiation of alcohol use and maintaining high rates of abstention, including life-time abstention.
The alcohol taxation system in Thailand tries to combine both aims.

Key findings
Specific taxation has been shown to be appropriate for countries with a high prevalence of current alcohol consumers, as it discourages high-risk patterns of alcohol consumption by promoting relatively inexpensive low alcohol content beverages; in countries with a high proportion of abstainers this system may encourage alcohol use initiation.
2C1 taxation may be more appropriate for countries with a high prevalence of alcohol abstainers, as it may prevent alcohol use initiation in addition to discouraging high-risk patterns of alcohol consumption. However, more and better-controlled research to test the theoretical attributes of 2C1 is necessary.
Thailand has a high prevalence of life-time alcohol abstainers potentially vulnerable to persuasion, especially at young ages.
In Thailand, those beverages which are most popular with, or desired by, youth are taxed using an ad valorem tax method, making them more expensive than under a specific tax method.
The researchers hypothesized that the stable percentage of current alcohol users among Thai people aged 15–24 years between 2001 and 2007 can be seen as a consequence of high price due to 2C1 taxation despite the expected increase in alcohol consumption due to economic factors. If Thailand were to shift from 2C1 taxation to specific taxation, the price of these beverages would decrease, probably resulting in an increase in alcohol use initiation. Under 2C1 taxation it is counterintuitive that wine coolers (low content beverage) and white spirits are taxed at a lower rate than other beverages with a similar price and alcohol content. These relatively low tax rates are the result of a government decision influenced by the political process and not inherent to the 2C1 taxation system itself.
Most countries consider alcohol taxation as a revenue generating tool rather than as a policy tool to reduce alcohol harms and thus to achieve public health goals. However, with increasing knowledge that the social costs of alcohol harms to an economy by far outweigh the taxation income, this may change. Other LMICs with a high prevalence of abstainers and increasing alcohol consumption may benefit from the 2C1 taxation system, as it may reduce and control high-risk patterns of alcohol consumption and help to prevent alcohol use initiation among youth.
Also, the relationship between 2C1 taxation and unrecorded consumption will have to be studied in other LMICs. However, until now, Thailand is estimated to have proportionally less unrecorded consumption than other LMIC.
Economic analyses have recommended a combination of specific and ad valorem taxation systems under different circumstances. The WHO Technical Manual on Tobacco Tax Administration compared 2C1 taxation’s theoretical properties, such as tax base and its impact on prices and health benefits with those of specific, ad valorem, mixed specific and ad valorem taxation, and minimum price taxation. It concluded that 2C1 has the potential to yield health benefits as it reduces down- grading, namely the reduction in the quality of a product, for example, by keeping filters on cigarettes.
An alternative solution to deterring initiation of alcohol use among youth in a country is to employ a minimum pricing policy. There are two main disadvantages to using a minimum pricing system compared to 2C1 taxation.
- First, minimum pricing increases the income of alcohol producers, which can be used to market alcohol, i.e. resulting in a consequence not necessarily advantageous for public health.
- Secondly, minimum pricing has no set taxation structure and, thus, could promote initiation of alcohol consumption by setting a low minimum price for low alcohol content high image beverages.
Limits of the Thai 2C1 alcohol tax system
There are some limitations to the 2C1 tax method as currently applied in Thailand.
- First, for the specific taxation method, excise taxes are fixed unless they are calculated taking into account changes in the Consumer Price Index.
- Secondly, 2C1 requires more supporting information than does either of the specific or ad valorem taxation systems alone, as 2C1 requires information pertaining to beverage strengths and pricing.
- Thirdly, more research is required to determine if taxation increases on low alcohol content beverages in LMIC will result in people switching from low alcohol content to medium alcohol content beverages.
Although taxation is one of the most effective measures to reduce alcohol consumption and the resulting harms, countries should formulate explicit and comprehensive alcohol policies on a national level (where appropriate, local and/or regional strategies may also be required). These strategies should not only rely on taxation but should include other measures, such as limiting the availability of alcohol, implementation and enforcement of advertising bans, and deterring alcohol- attributable harms through measures such as alcohol impaired driving counter-measures.
Conclusion
Neither the ad valorem nor the specific taxation systems alone have the desired effects of decreasing high-risk consumption of alcohol and deterring alcohol use initiation.
2C1 taxation targets both objectives simultaneously by applying the lowest tax to medium alcohol content beverages. The 2C1 taxation method may be an effective way of reducing alcohol harms in the short- and middle-term in LMIC with a high prevalence of abstainers, often life-time abstainers.
Abstract
Aim
Prevention of alcohol use initiation is a significant challenge in low- and middle-income countries that have a high prevalence of abstainers, including life-time abstainers.
This paper aims to encourage a debate on an alternative alcohol taxation approach used currently in Thailand, which aims specifically to prevent alcohol use initiation in addition to reduce alcohol-attributable harms.
Methods
Theoretical evaluation, simulation and empirical analysis.
Result
The taxation method of Thailand, ‘Two-Chosen-One’ (2C1) combines specific taxation (as a function of the alcohol content) and ad valorem taxation (as a function of the price), resulting in an effective tax rate that puts a higher tax both on beverages which are preferred by heavy alcohol users and on beverages which are preferred by potential alcohol consumption neophytes, compared to either taxation system alone.
As a result of these unique properties of the 2C1 taxation system, the study simulations indicate that 2C1 taxation leads to a lower overall consumption than ad valorem or specific taxation alone.
In addition, it puts a relatively high tax on beverages attractive to young people, the majority of whom are currently abstaining. Currently, the abstention rates in Thailand are higher than expected based on its economic wealth, which could be taken as an indication that the taxation strategy is successful.
Conclusion
‘Two-chosen-one’ (2C1) taxation has the potential to simultaneously reduce alcohol consumption and prevent alcohol use initiation among youth; however, additional empirical evidence is needed to assess its effectiveness in terms of the public health impact in low- and middle-income countries.