Science makes the case for higher alcohol taxes
It seems to be a popular opinion that a glass of wine a day can be “good for the heart.” However, it’s high time we challenged this notion as nothing more than an unfounded belief.
As recently as the 1950’s, cigarettes were considered safe, and menthol cigarettes were often thought of as a means to soothe one’s throat. Science refuted this, however, and long-term evidence now shows that smoking or tobacco use is directly responsible for illnesses such as cancer, heart disease, stroke, lung diseases, diabetes and chronic obstructive pulmonary disease.
Alcohol is in a similar place now. For a very long time, many of us have believed that some level of alcohol consumption is not bad and that, provided one “drinks responsibly,” some alcohol use may even be beneficial. But science is now catching up, and new evidence is damning.
On Jan. 4, 2023, the World Health Organization (WHO) stated definitively that there is no “safe level” of alcohol use. To quote the WHO’s statement directly: “It doesn’t matter how much you drink — the risk to the drinker’s health starts from the first drop of any alcoholic beverage. The only thing that we can say for sure is that the more you drink, the more harmful it is — or, in other words, the less you drink, the safer it is.”
Further reading or study shows that the WHO statement on this complex issue is nuanced. It’s important to understand how exactly alcohol use adversely impacts people, as individuals and on a societal level.
Alcoholic beverages are known to be a human carcinogen. This means that alcohol use has been found to be a direct cause of various cancers, including cancer of the mouth, pharynx, larynx, esophagus, liver, colorectum and female breast.
Some recent studies have also shown that consuming alcohol can accelerate genetic aging, reduce brain size, and increase the risk of cardiovascular diseases such as hypertension, coronary artery disease, myocardial infarction, stroke, heart failure and atrial fibrillation.
We know that alcohol, being a psychoactive substance, tends to intoxicate the user. This means that alcohol use can lead to impaired judgment and coordination. Alcohol use is associated with the risk of developing mental and behavioral disorders as well. Thus, the larger societal impact of alcohol includes the unintentional and intentional injuries due to road traffic crashes; violence against women and children; and suicide.
All in all, the WHO has identified the harmful use of alcohol as being a causal factor in more than 200 disease and injury conditions. The estimated global death toll attributable to harmful alcohol use is 3 million deaths every year, or about 5.3% of all deaths.
While the aggregate figures should be compelling enough, we ought to consider the distributional impact as well. Harmful use of alcohol tends to adversely affect vulnerable groups to a much greater degree. Groups such as young or low-income individuals tend to be less informed about the harmful effects of alcohol consumption while also being less financially capable of coping with the detrimental health costs.
Given the social and cultural norms surrounding alcohol in the Philippines, a significant proportion of Filipinos starts consuming alcohol at a young age. This is exacerbated by the fact that the alcohol industry has begun marketing products such as alcopops and alcomixes towards younger consumers.
Given the large economic and social toll, how should policymakers respond?
The WHO has recommended several policies including regulating the marketing/advertising of alcoholic beverages; regulating or restricting the availability of alcohol; enacting and enforcing drink-driving policies; and providing accessible and affordable treatment for people with alcohol-use disorders.
By far, however, the most effective measure to address these alcohol-related issues would be to reduce demand through taxation. While higher taxes may not bring consumption down to zero, even inducing the behavior change of one less glass of alcohol a day would represent large gains on the aggregate.
The Philippines has just celebrated the 10th anniversary of the Sin Tax Reform of 2012. This law led to further increases in alcohol and tobacco tax rates in succeeding years. The biggest gains are from tobacco taxes. Tobacco tax rate increases have been significantly higher than those for alcohol products. The result of increasing tobacco taxes over the last decade is that the price of cigarettes has nearly quadrupled, and consequently the prevalence of tobacco smoking in the country has fallen by a third — from 29.7% in 2009 to 19.5% in 2021. This demonstrates the effectiveness of tax policy as a driver of health outcomes.
The price of alcoholic beverages has not risen as dramatically as has tobacco. According to a policy brief by the Congressional Policy and Budget Research Department in 2022, beer prices, for example, grew by 72% to 78% over the past decade, with 2012 as baseline.
The increased alcohol taxes have raised significant revenues, to be sure. Annual alcohol excise collections have risen from P23.9 billion in 2012 to over P90.1 billion in 2021. But this amount still pales in comparison to what tobacco tax rates have generated — from P33 billion in 2012 to P174 billion in 2021. Further, the comparatively smaller increase has led to less-than-great progress in terms of curbing alcohol consumption.
We must now enact an alcohol tax policy to address both our health and fiscal objectives. Alcohol taxes are a surefire way to improve health and save lives as well as broaden fiscal space and reduce the economic burden of alcohol.
Aj Montesa is a program officer for research and heads the tax policy team of Action for Economic Reforms.