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The impact of excise duty changes on retail prices in the UK

Author

Listed:
  • Paul Baker
  • Vanessa Brechling

Abstract

The annual exercise of revising excise duties has become part of Budget Day tradition. The need for such revision arises because, unlike VAT and the ad valorem tax on cigarettes, excise duties are set in nominal terms according to the physical quantity of the goods on which they are levied. Hence, regardless of any policy-based changes, if the real value of excise duties is to be maintained, the effect of inflation must be countered. However, there is perception in some quarters that producers respond to changes in excise duty rates by increasing prices beyond those implied by the tax alone. No doubt there is considerable potential for 'bar-room debate' over, for example, the contention that if the Chancellor puts 1p on the price of beer, the brewers will add another 1p for themselves. Underlying such a contention is the notion that there is some feature of the industries subjiect to excise duties which allows them to engage in such behaviour. It is noticeable that the principal industries on which excise duties are levied, namely alcohol, tobacco and petrol, have been the subject of major Monopolies and Mergers Commission investigations.

Suggested Citation

  • Paul Baker & Vanessa Brechling, 1992. "The impact of excise duty changes on retail prices in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 13(2), pages 48-65, January.
    • Handle: RePEc:ifs:fistud:v:13:y:1992:i:2:p:48-65
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    Cited by:

    1. Jon P. Nelson, 2014. "Gender Differences In Alcohol Demand: A Systematic Review Of The Role Of Prices And Taxes," Health Economics, John Wiley & Sons, Ltd., vol. 23(10), pages 1260-1280, October.
    2. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    3. Richard Blundell, 2009. "Assessing the Temporary VAT Cut Policy in the UK," Fiscal Studies, John Wiley & Sons, vol. 30(1), pages 31-38, March.
    4. Hasret Benar & Glenn P. Jenkins, 2008. "The Economics of Regulation and Taxation Policies for Casino Tourism," Tourism Economics, , vol. 14(3), pages 483-510, September.
    5. Sophia Delipalla & Owen O'Donnell, 1998. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition: Evidence from the European Cigarette Industry," Studies in Economics 9802, School of Economics, University of Kent.
    6. Helena Blazic & Mira Dimitric, 2009. "The reduced VAT rate for small business in Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 27(1), pages 83-114.
    7. Conniffe, Denis & McCoy, Daniel, 1993. "Alcohol Use in Ireland: Some Economic and Social Implications," Research Series, Economic and Social Research Institute (ESRI), number GRS160, June.
    8. Roy Bahl & Richard Bird & Mary Beth Walker, 2003. "The Uneasy Case Against Discriminatory Excise Taxation: Soft Drink Taxes in Ireland," Public Finance Review, , vol. 31(5), pages 510-533, September.
    9. Michele Santoni, 2017. "Protective Excise Taxation," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 421-445, December.
    10. Delipalla, Sophia & O'Donnell, Owen, 2001. "Estimating tax incidence, market power and market conduct: The European cigarette industry," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 885-908, May.
    11. David Paton & Donald S. Siegel & Leighton Vaughan Williams, 2002. "A Policy Response To The E--Commerce Revolution: The Case Of Betting Taxation In The UK," Economic Journal, Royal Economic Society, vol. 112(480), pages 296-314, June.
    12. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
    13. Leighton Vaughan Williams, 2014. "The Churchill Betting Tax, 1926-30: A historical and economic perspective," Economic Issues Journal Articles, Economic Issues, vol. 19(2), pages 21-38, September.
    14. Nelson Jon P. & Moran John R., 2020. "Effects of Alcohol Taxation on Prices: A Systematic Review and Meta-Analysis of Pass-Through Rates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-21, January.
    15. Ce Shang & Anh Ngo & Frank J. Chaloupka, 2020. "The pass-through of alcohol excise taxes to prices in OECD countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(6), pages 855-867, August.

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