13.11.2018 1

Impact of alcohol taxes and border trade on alcohol consumption:

the Finnish experience

Pia Mäkelä

Research professor

Pia Mäkelä

Why are we interested in alcohol?

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Globally, in 2016,

- 99 million disability-adjusted life years (DALYs) were attributable to alcohol (4·2% of all DALYs)

- alcohol use was the seventh leading risk factor for both deaths and DALYs in 2016.

- among the population aged 15–49 years, alcohol use was the leading risk factor.

Source: GBD 2016 Alcohol and Drug Use Collaborators, Lancet 2018

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2010 WHO member states: the global strategy to reduce

the harmful use of alcohol

WHO “best buys” to reduce

non-communicable diseases included

three recommendations on alcohol:

• Increase excise taxes on alcoholic beverages

• Bans or comprehensive restrictions on

alcohol advertising

• Restrictions on the physical availability

of retailed alcohol

Alcohol policy recommendations by WHO

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OECD, Organisation for Economic Co-operation and Development

• OECD 2015 recommendations:

- Brief interventions in health care

- Raising alcohol prices, especially the cheaper segment

- Regulating the promotion of alcoholic beverages

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What does research say about impacts of prices?

Wagenaar et al. 2009 / systematic review and meta-analysis:

- 112 studies, 1003 estimates about the connection betweenalcohol price OR tax and alcohol consumption

- The price elasticity estimates (how much consumptionchanges when price / tax changes by 1%?):

- Beer: -0.46

- Wine: -0.69

- Spirits: -0.8

- Alcohol in general: -0.51

A second meta-analysis of Wagenaar et al. (2010) confirmed thatalcohol prices / taxes have an impact on alcohol-related mortalityand other harm from drinking

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A complication to using taxes as a means to reduce harm: travellers’ imports

• Normally it is assumed that if taxes are raised, the priceincreases, which reduces consumption and harms.

• When cheaper alcohol can be brought from elsewhere, the equation gets more complicated

– However, also the price of gas or bus/train/boat ticket, as well as time used for the travel are a part of the effective price

• i.e., even when borders ”leak”, it is likely that a tax increase willincrease the effective price of alcohol, though to a smaller extent thanif borders were closed.

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Hotspots in travellers’ alcohol imports in Europe

13.11.2018 8Travellers imports in Europe / Thomas Karlsson

The case of Finland in 2004

• Quotas for tarvellers’ imports ended in January

-> unlimited imports for personal use from other EU-countries

• Estonia joined the EU in May

-> Finland suddenly had a close-by southern neighbour with clearly cheaper alcohol

• Finland tried to combat travellers’ imports by cutting alcoholexcise duties by 33% on average (in March)

• Sweden faced similar situation with travellers’ imports fromDenmark but did not cut taxes

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Per capita alcohol consumption and alcohol-related mortality among the working-aged

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2004 tax cut &

Estonia into EU

Per capita alcohol consumption and alcohol-related mortality among the working-aged

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2004 tax cut &

Estonia into EU

5 tax increases

+ economic

downturn

Per capita alcohol consumption and alcohol-related mortality among the working-aged

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2004 tax cut &

Estonia into EU

5 tax increases

+ economic

downturn

Experience from Sweden

• Alcohol imports made a large proportion of alcoholconsumption in Southern Sweden

• However, per capita consumption did not increase, nor didmortality

• The general conclusion in these two countries has been thatSweden’s approach (not to lower alcohol taxes) resulted in a better outcome in those circumstances

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Travellers’ alcohol imports to Finland and taxes: the alcohol industry’s point of view

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Alcohol tax increases

In 2008, 2009 x 2, 2012 & 2014

Litres of beverage dominated by beer

Travellers’ imports, litres

Travellers’ alcohol imports to Finland and taxes– in perspective

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0

0,2

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0,6

0,8

1

1,2

1,4

0

2

4

6

8

10

12

14

199

5

199

6

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7

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4

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litres 100 % alcohol (+15 v) billion euro

1,8 litres

10,8 litresTotal alcohol consumption,

litres (+15 yrs)

Travellers alcohol imports,

litres 100% alc. (+ 15 yrs)

Alcohol tax revenue, billion €

Recent changes in Finnish alcohol policy

• A new Alcohol Act came into force 1.1.2018

– Only decided upon just before the Christmas break

– Main changes about sales in grocery stores:

• max alcohol limit 4.7% -> 5.5%

• Pre-mixed, spirits-based drinks / ”long drinks” allowed

– Other changes: less red tape for restaurants, lengthened bars’ opening hours etc. (1.3.2018 ->)

– Other smaller changes

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What else impacted consumption in 2018?

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- In 2007–2017 a constantdecreasing trend, altogether-18% (due at least to 5 alcohol

tax increases & poor economicdevelopment)

- In 2018: alcohol tax increaseby 10% (decreasesconsumption)

On the other hand:

- Exceptional heat wave

(increases consumption)

Zero change

(blue line)

does not equal

zero impact

Observed

consumption

Trend 07-17

Trend continues

Zero cha nge

What have we observed so far?

Observed I-VIII/2018 vs. I-VIII/2017:

- Registered sales: +1%

- Beer: a slight movement towards stronger beer (not as much as THL predicted)

- Retail sales of all types of Long drinks combined: +48%

If change will turn out to be less than expected: did prices change as expected (-40%) by both public health and alcohol industry?

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Alcohol price index in Alko stores and in grocery stores for ”strong” alcoholic beverages (4,7-5,5%)

Index, December 2017 Alko prices=100

Long drink Alko

Long drink, stores

Lager Alko

Lager, stores

Source: consumer price index, Statistics Finland

13.11.2018 Alkoholinkäyttö ja haitat / Thomas Karlsson 20

When should the impact be visible? Compare: introduction of ciderto stores in 1995

Short-term impacts are better assessed for the whole of 2018.

Better estimate of impacts after 2-3 years.

Time series analysis should be used to tease out the impact of the Law from impacts of economy, tax, heat wave, pre-existingtrend etc.

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