Major reduction in taxes on alcohol - Follow up

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Abstract

Finland reduced taxes on alcohol beverages significantly in March 2004 to adapt to EU free market regulations. This increased markedly consumption of alcohol and harms related to that. To counterbalance this, stricter restrictions on alcohol advertising and pricing were introduced in January 2008. Additionally tax rate of alcohol beverages was again increased somewhat. However, tax rate was not increased to as high level as it was in 2003.

Neue Entwicklungen

Lowering taxes on alcoholic beverages in 2004

Anticipating the EU membership of neighbouring Estonia in 2004 and the elimination of national quotas on private alcohol import, under the EU free market regulations, Finland decided to lower the alcohol tax in March 2004 in order to smooth over great price differences and to counteract expected large imports and ensuing loss of alcohol taxes. Taxes on spirits, beer and wine were lowered by 44%, 32% and 10% leading to corresponding price reductions of 36%, 13% and 3%.

2004 prevention program to diminish negative effects of greater alcohol consumption due to lower taxes

To diminish the negative impact of the tax reduction a preventive alcohol programme was started in April 2004 by the Ministry of Social Affairs and Health (Alcohol Programme 2004-2007). The programme was implemented in collaboration with the various sectors of public administration, municipalities, churches, NGOs as well as business and industry organisations. The objective was to co-ordinate and combine the measures aiming at the prevention and reduction of alcohol problems into a systematic whole. Three main goals for the prevention and reduction of the adverse effects of alcohol were 1) to reduce adverse effects of alcohol consumption on the wellbeing of children and families, 2) to reduce hazardous drinking and its consequences and 3) to reverse the trend in overall alcohol consumption.

But: Negative impact of tax decrease greater than expected

However, despite of the Alcohol Programme the tax reduction had a more significant impact on alcohol consumption and on public health than anticipated. Documented alcohol consumption rose by 10% in 2003-2006 reaching new all time peak of around 8.4 litres per inhabitant (figure does not include homemade or imported alcohol). At the same time money spent on alcohol per capita decreased by 4%. Selling of alcohol was somewhat shifted from restaurants and pubs to retail outlets.

Initially after the tax reduction (between the years 2003-2004) the number of people arrested from drunkenness increased by 11% (but decreased in following years), number of drink driving increased by 10% (did not increase after that), number of alcohol related discharges in hospitals increased by 9% mostly due to alcohol psychoses, alcohol intoxication and diseases of the liver caused by alcohol (did not increase after that), alcohol related deaths increased by 14% (altogether 22% between 2003-2006) and mortality from alcoholic diseases of the liver increased 29% (altogether 52% between 2003-2006). In 2005 alcohol related deaths rose as a leading cause of death among working age men above ischemic heart disease which has been the leading cause of death previously. It is also estimated that number of violent crimes and problems in families increased significantly due to tax reduction.

New measures to curb alcohol consumption

To reduce the consumption of alcohol, the parliament reformed the legislation on alcohol in February 2007. From January 2008 onwards, the reform prohibited retail outlets to have alcohol beverage price discounts which are based on selling beverages in large quantities. It also prohibited advertisement of price discounts by restaurants and retail outlets. 

Secondly, the parliament decided in November 2007 to again increase the tax on alcoholic beverages from January 2008 on. However, the tax was not increased up to the level as it was in 2003. In 2008 there has been public discussion that alcohol tax should be increased even further.

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral
current    previous

There has been rather strong consensus that health consequences of tax reduction in 2004 were too severe and taxes on alcohol should be increased again somewhat.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Initiators of idea/main actors

• Regierung

• Bürgergesellschaft

• Wissenschaft

• Privatwirtschaft, privater Sektor

Stakeholder positions

The new government appointed in April 2007 has driven the tax increase. The Government Programme stated that taxes on alcoholic beverages and tobacco products will be raised in an attempt to promote public health (see HPM 10/2007). Also one of the explicit targets of the National Development Programme for Social Welfare and Health Care adopted by the government is to decrease consumption of alcohol to the level in which it was in 2003 (see HPM 11/2008).

National experts on alcohol policy have strongly supported the tax increase. Also the common public is in favour of the tax increase. According to an opinion poll conducted in 2007, 33% of the population were in favour of stricter alcohol regulations and 11% in favour of more liberal regulations (STAKES 2007).

Actors and positions

Regierung
The government	sehr unterstützend		stark dagegen
The Ministry of Social Affairs and Health	sehr unterstützend		stark dagegen
Bürgergesellschaft
Public	sehr unterstützend		stark dagegen
Wissenschaft
Experts	sehr unterstützend		stark dagegen
Privatwirtschaft, privater Sektor
Alcohol industry	sehr unterstützend		stark dagegen
current    previous

Influences in policy making and legislation

The alcohol legislation was reformed in February 2007 to reduce the consumption of alcohol. It introduced stricter restrictions on alcohol advertising and pricing.

Secondly, the parliament decided in November 2007 to again increase the tax on alcoholic beverages from January 2008 on following the proposal of the newly appointed government. However, tax was not increased to as high a level as it was in 2003. Taxes on spirits, beer and wine were increased by 15%, 10% and 10% leading to corresponding price increases of 11%, 4% and 4%. The Social Affairs and Health Committee of the Parliament stated that taxes should be increased more than the government proposed. According to the committee the proposed tax increase is too modest to really influence consumption (it should be at least 20%). However, alcohol tax is an important revenue for the state and it is feared that too significant tax increases will increase private import which would then decrease the tax revenue. Political parties in opposition opposed the decision and demanded a greater increase, but the bill was passed based on the proposal of the government.

Legislative outcome

Enactment

Actors and influence

Regierung
The government	sehr groß		kein
The Ministry of Social Affairs and Health	sehr groß		kein
Bürgergesellschaft
Public	sehr groß		kein
Wissenschaft
Experts	sehr groß		kein
Privatwirtschaft, privater Sektor
Alcohol industry	sehr groß		kein
current    previous

Positions and Influences at a glance

Adoption and implementation

The price of alcohol has now increased which is hoped to decrease the consumption of alcohol especially among high consumers.

Monitoring and evaluation

Developments in alcohol consumption and in alcohol related harms have been followed from statistics gathered by STAKES and other state level organisations in the field of the Ministry of Social Affairs and Health. The tax reduction implemented in 2004 increased consumption of alcohol and harms related to that.

Expected outcome

The new tax increase is rather modest to really influence the consumption of alcohol. It remains to bee seen if the tax increase will decrease alcohol related harms as intended and what effect it will have to the legal and illegal import of alcohol, especially from Russia and Estonia, which are neighbouring countries of Finland having significantly lower prices in alcohol beverages.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch
current    previous

Afterwards it was appraised that the tax reduction of the magnitude adopted in 2004 was a mistake and the tax increase was urgently needed to decrease the consumption of alcohol and harms related to it . However, the new tax increase was rather modest and some additional measures are probably needed to reduce the ill effects of alcohol consumption in Finland.

References

Sources of Information

Mäkelä P and E Österberg. Upward trends in alcohol consumption and related harm in Finland. Nordic Studies on Alcohol and Drugs 24 (supplement):29-46, 2007.

STAKES. Yearbook of Alcohol and Drug Statistics 2007. Official Statistics of Finland, SVT Social Protection, 2007.

Reform formerly reported in

Major reductions in taxes on alcohol beverages Process Stages: Umsetzung, Gesetzgebung

Author/s and/or contributors to this survey

Vuorenkoski, Lauri

Empfohlene Zitierweise für diesen Online-Artikel:

Vuorenkoski, Lauri. "Major reduction in taxes on alcohol - Follow up". Health Policy Monitor, April 2008. Available at http://www.hpm.org/survey/fi/a11/1