The alcohol tax might even have to rise by 1 to 1.5 percent per year to make sure we don’t have a second beer.

Probably everyone today is aware that too much alcohol is bad for you. Still, according to some, a few beers or glasses of wine are sometimes part of it. Think of a nice evening with friends or at a party. Unfortunately, alcohol consumption is still too often accompanied by dire consequences. In 2015, for example, an estimated 12 to 23 percent of road deaths in the Netherlands were caused by alcohol. And if we want to reduce these figures, far-reaching measures may be needed to ensure that we leave that second beer.

External costs

In a new study, the researchers looked at the “major external costs” associated with alcohol consumption. “These are costs that are borne by society in general, not the individual,” said study researcher James Fogarty in an interview with Scientias.nl from. “Think, for example, of someone who drinks too much, then gets in the car, flies out of a corner and kills someone. The existence of such externalities makes it appropriate to pay more attention to alcohol consumption than to other consumer goods.”

imbalance

The researchers calculated the external costs associated with alcohol consumption. And that leads to a rather worrying conclusion. “I thought the external costs were high,” says Fogarty. This means that the alcohol consumption of one person entails too high a cost for the entire society.

Rich countries

But not only that. In their study, the researchers discovered that alcohol consumption is increasing especially in rich countries. “There is a natural tendency for alcohol consumption to increase with income,” says Fogarty. As economies and incomes grow, we seem to be reaching for the bottle faster. In fact, if the alcohol tax stays the same for the next decade, more people will probably drink in 2027 than in 2017. And that in turn can lead to more external costs. New, far-reaching measures are therefore needed to stop this trend. Because it is possible that our alcohol consumption can only be reduced with annual tax increases.

Alcohol tax

At present, alcohol excise duties are already levied on alcoholic beverages in the Netherlands. For example, a 330 ml bottle of beer carries 0.12 euro cents of excise duty. And on a bottle of wine, 0.66 euro cents. Its purpose is to discourage alcohol consumption. However, these excise duties may not be sufficient. According to the researchers, we may only be able to stop the predicted increase in alcohol consumption by raising tax rates. And that by about half the growth of gross national income. “For rich countries, this equates to about 1 to 1.5 percent per year,” said Fogarty.

Wallet

Apparently we can only slow down the growing alcohol consumption by hitting our wallets. “In my study, I cite extensive research that has shown that when the price of alcohol rises, perceived total consumption falls,” said Fogarty. This in turn means that the external costs of alcohol consumption will also fall. “The optimal alcohol tax tries to balance the welfare loss due to taxation with the welfare gain due to lower external costs,” says the researcher.

Alcoholic beverages

An interesting question is which drinks should be subject to more excise duty each year. Is that on every beer, or rather on spirits, for example? According to Fogarty, this should be considered on a country-by-country basis. “Tax rates can again be linked to external costs,” he explains. “However, this differs per country. In some countries, such as Australia and the United States, it appears that beer consumption in particular may be associated with road accidents. As a result, you could argue that in these countries the excise duties on beer should be higher than on other types of drinks.”

So if we want to reduce the external costs of alcohol consumption, then there may be no other option than to increase excise duties. These measures could help reduce alcohol consumption worldwide. Because too often alcohol still claims lives. Fortunately, there are now plenty of alternatives, where you can hardly taste the differences. Because let’s face it, an alcohol-free beer or a ‘nojito’ might just be just as tasty?!