Policymakers weigh drawbacks of alcohol tax hikes

Cologne alcohol.JPG

This article is part of our special report Reviewing Europe’s alcohol harm strategy.

Rising alcohol taxes and minimum pricing strategies will boost the amount of “unrecorded alcohol” consumed in Europe, increasing bootlegging and health risks,  industry-backed advisors have warned.

According to the last global estimates of unrecorded alcohol produced by the UN World Health Organization in 2005, 22% of total adult consumption in Europe during 2005 was unrecorded.

Unrecorded alcohol is untaxed and unregulated because it is produced, distributed and sold outside formal channels. It includes homemade and smuggled alcohol and alcohol intended for industrial or medical uses.

There are no generally accepted standards for quantifying the extent of the informal beverage alcohol market or for charting its health consequences. Since the alcohol content of moonshine and industrial alcohol is beyond the reach of regulators, it is impossible to monitor its danger to health or guarantee that the product is consistent.

The International Centre for Alcohol Policies (ICAP) – an industry-backed organisation – is conducting research into the incidence of noncommercial alcohol in various target countries where current data are inadequate or unavailable.

Although the research is not yet complete, Marjana Martinic, ICAP’s deputy president, told EURACTIV that proportions or unrecorded alcohol are higher in Eastern Europe, and increased taxation and minimum pricing of alcohol – such as the United Kingdom, the Netherlands and Malta are considering – are all factors that can drive consumption into the unrecorded sector.

Driving heavy drinkers to perfume

“Our research shows that preference for beverages is dependent on the prices people pay. Heavier drinkers trade down so when the price goes up they will substitute something less expensive,” said Martinic.

Heavy drinkers frequently turn to ‘surrogate’ alcohols, she said, adding that this is a particular problem in Eastern Europe.

“In the Baltic countries, for example, cologne is an issue. It’s much cheaper than other taxed beverages, and people will therefore drink non-potable alcohols such as window-washing fluid and colognes, and there is a public health issue with that,” she said.

Price hikes in alcohol also promote smuggling which also has a knock-on effect on health, Martinic said.

Pierre-Olivier Bergeron, the Brewers of Europe secretary-general, said a recent study of Swedish alcohol markets revealed that 30% of the beer purchased is unrecorded due to the high excise duties.

“It was smuggled by extremely well organised networks that manage to reach out to under-aged drinkers," he said.

“We do not want to encourage smuggling and illicit alcohol, and we of course acknowledge that this is a problem and you have to follow that up,” said Marienn Skar, secretary-general of Eurocare, the alcohol policy alliance. But she added: “I have not seen evidence that if you put in a minimum price it would have that effect.”

Consumer groups defending traditional beer culture are concerned that rising duties are boosting smuggling. “We think duty should be used to raise money and not as a means of controlling consumption, which should be left to education and enabling alcohol to be consumed in controlled environments. I think you will get smuggling when it is worthwhile for people to do it. The white van trade for beer and wine and selling on was a booming trade and that has died out a bit now and people are finding easier ways to smuggle through diversionary systems of exporting goods,” said Ian Loe, of the secretariat of the European Beer Consumers Union (EBCU).

Europeans have the highest per-capita consumption of alcohol and drinking causes nearly one in 10 cases of ill health and premature death.

The European Commission's informal alcohol strategy will be evaluated later this year. The policy objective of the strategy is to reduce the health and social harm due to alcohol consumption, although tax and pricing issues are within the domain of member states.

  • This week: Independent evaluator on alcohol strategy consults with stakeholders with draft report.
  • Sept. 2012: Final evaluation report on alcohol strategy sent to the Commission.
  • Sept. 2012: Alcohol strategy discussed at Cypriot presidency event on chronic diseases.
  • Oct. 2012: ICAP conference on unrecorded alcohol
  • Oct. 2012: Commission publishes evaluation report with preliminary remarks.
  • Q1 2013: Commission to decide whether to update existing strategy, or introduce more comprehensive alcohol regulation instruments.

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.