Ally, A.K., Meng, Y., Chakraborty, R. et al. (8 more authors) (2014) Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently? Addiction, 109 (12). 1994 - 2002. ISSN 0965-2140
Abstract
Background and Aims Effective use of alcohol duty to reduce consumption and harm depends partly on retailers passing duty increases on to consumers via price increases, also known as ‘pass-through’. The aim of this analysis is to provide evidence of UK excise duty and sales tax (VAT) pass-through rates for alcohol products at different price points.
Setting March 2008 to August 2011, United Kingdom.
Design and Measurements Panel data quantile regression estimating the effects of three duty changes, two VAT changes and one combined duty and VAT change on UK alcohol prices, using product-level supermarket price data for 254 alcohol products available weekly. Products were analysed in four categories: beers, ciders/ready to drink (RTDs), spirits and wines.
Findings Within all four categories there exists considerable heterogeneity in the level of duty pass-through for cheaper versus expensive products. Price increases for the cheapest 15% of products fall below duty rises (undershifting), while products sold above the median price are overshifted (price increases are higher than duty increases). The level of undershifting is greatest for beer [0.85 (0.79, 0.92)] and spirits [0.86 (0.83, 0.89)]. Undershifting affects approximately 67% of total beer sales and 38% of total spirits sales.
Conclusions Alcohol retailers in the United Kingdom appear to respond to increases in alcohol tax by undershifting their cheaper products (raising prices below the level of the tax increase) and overshifting their more expensive products (raising prices beyond the level of the tax increase). This is likely to impact negatively on tax policy effectiveness, because high-risk groups favour cheaper alcohol and undershifting is likely to produce smaller consumption reductions.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2014 Society for the Study of Addiction. This is an author produced version of a paper subsequently published in Addiction. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Alcohol excise duty; alcohol pass-through; alcohol prices; alcohol taxation; alcohol tax policy; quantile regression |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Medicine, Dentistry and Health (Sheffield) > School of Health and Related Research (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 03 Jul 2015 12:35 |
Last Modified: | 16 Nov 2016 01:15 |
Published Version: | http://dx.doi.org/10.1111/add.12590 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1111/add.12590 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:87746 |