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Alcohol taxes, tax revenues and the Single European Market

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  • Ian Crawford

    ()
    (Institute for Fiscal Studies and University of Surrey)

  • Sarah Tanner

Abstract

This paper addresses the issue of whether tax revenue from alcohol lost through cross-border shopping could be recouped by cutting excise duties. This in turn depends on the elasticity of demand for alcohol. We use data from the Family Expenditure Survey 1978-96 to estimate own- and cross-price elasticities of demand for beer, wine and spirits before and after completion of the Single Market. We find no evidence of a significant change in elasticities after the Single Market. The tax rates on beer and wine are currently below their revenue-maximising rates, implying that a cut in the duty rate on beer or wine would lead to a decrease in indirect tax revenue from alcohol. We cannot reject that the current tax rate on spirits is at the revenue-maximising rate, implying that further increases in the duty on spirits are likely to cause indirect tax revenue to fall.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 20 (1999)
Issue (Month): 3 (September)
Pages: 287-304

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Handle: RePEc:ifs:fistud:v:20:y:1999:i:3:p:287-304

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  1. Ian Crawford & Sarah Tanner, 1995. "Bringing it all back home: alcohol taxation and cross-border shopping," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 16(2), pages 94-114, May.
  2. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
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Cited by:
  1. Hella, Heikki & Mankinen, Reijo, 1999. "Alcoholic Beverage Taxation: Alternatives and Impacts," Discussion Papers, The Research Institute of the Finnish Economy 696, The Research Institute of the Finnish Economy.
  2. Ian Crawford & Sarah Tanner, 1995. "Bringing it all back home: alcohol taxation and cross-border shopping," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 16(2), pages 94-114, May.
  3. Katarina Nordblom, 2011. "The complex attitudes to alcohol taxation," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 43(24), pages 3355-3364.
  4. Timothy K.M. Beatty & Erling Røed Larsen & Dag Einar Sommervoll, 2007. "Driven to Drink. Sin Taxes Near a Border," Discussion Papers, Research Department of Statistics Norway 507, Research Department of Statistics Norway.
  5. Lacruz, Ana Isabel Gil & Lacruz, Marta Gil, 2010. "Does alcohol consumption reinforce mental problems in adolescence?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 39(2), pages 223-232, April.
  6. Rinaldi, Gustavo, 2007. "The use of economic tools to develop a consensus on alcohol policies within and between jurisdictions," MPRA Paper 21941, University Library of Munich, Germany, revised 18 Apr 2007.
  7. Michael Keen, 2002. "Some International Issues in Commodity Taxation," IMF Working Papers 02/124, International Monetary Fund.
  8. Rizzo, Leonzio, 2000. "Equalisation and Fiscal Competition," MPRA Paper 5335, University Library of Munich, Germany.
  9. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer, Springer, vol. 16(2), pages 135-148, May.
  10. Aronsson, Thomas & Sjögren, Tomas, 2005. "Externalities, Border Trade and Illegal Production: An Optimal Tax Approach to Alcohol Policy," Umeå Economic Studies 654, Umeå University, Department of Economics.
  11. Sijbren Cnossen, 2006. "Alcohol Taxation and Regulation in the European Union," CESifo Working Paper Series 1821, CESifo Group Munich.
  12. Ana Gil & José Molina, 2009. "Alcohol demand among young people in Spain: an addictive QUAIDS," Empirical Economics, Springer, Springer, vol. 36(3), pages 515-530, June.

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