Executive summary•Economic efficiency, equity, and enforceability and compliance are the general principles that guide taxation policy.
•Inconsistencies exist in the current alcohol taxation regime when viewed against these principles. For example, the excise on low-strength draught beer is about one fifth that on low-strength packaged beer, while the tax on cask wine is only a fraction of that on mid-strength beer even though wine has higher alcohol content. The amount of wine equalisation tax (WET) is unrelated to alcohol content. These differences seem unrelated to policy objectives.
•In practice, alcohol taxation entails trade-offs among different considerations such as the need to raise revenue, the effects on consumer behaviour, and the ease of administration. However, scope exists for considerable improvement in alcohol taxation.
•Reform options based on the general taxation
principles include broadening the tax base, eliminating preferential treatment of certain beverages and producers, applying a single excise rate, structuring excise so that rates rise as alcohol content increases, and abolishing the WET and replacing it with excise.
•Taxing alcoholic beverages on the basis of alcohol content, combined with a graduated taxation rate, whereby the tax rate is higher the higher the alcohol content of the beverage, would represent a considerable improvement on the current alcohol taxation regime. The evidence indicates that combining a graduated tax based on alcohol content with an increase in the overall tax take would reduce the very considerable social costs of excessive alcohol consumption.
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