14 thoughts on “Do drinkers pay their way?”

  1. Posted 03/09/2015 at 11:11 | Permalink

    An aspect of alcohol consumption that seems to keep being left out is the benefits of moderate consumption. Although the effects are not very well studied – little account is taken of diurnal variation, nor of the accuracy of self reported values, for instance. However, most studies show benefits to males and females of all age groups. For men, the benefits tail off around anywhere between 20 and 35 units per week (yes, that is above the ‘recommended’ level).

    The main reason for the net benefits (which are maximised at an overall odds ratio of ~0.8) seem to arise from the protection from cardiovascular diseases, which continue to be the main causes of death (depending on the taxonomy used for causes of death such as cancer, which is actually many different diseases).

    That 20% reduction in risk is comparable to the impact found for statins on cvd.

  2. Posted 04/09/2015 at 07:59 | Permalink

    The report says (referring to revenue from alcohol taxes): “We do, however, include taxation
    placed specifically on alcoholic beverages, namely alcohol duty and VAT
    levied on alcohol duty (but not VAT levied on the product itself, which we
    assume would be levied on alternative products in the absence of alcohol).” This is spurious reasoning since VAT would also be levied on alternative products in the absence of alcohol duty.

  3. Posted 05/09/2015 at 14:22 | Permalink

    what it is saying is that VAT on the duty is really part of the duty (ie an alcohol tax) but VAT on the product price minus the duty is a tax that is charged on all products (except things that are zero rated) and thus is a non-discriminatory tax

  4. Posted 07/09/2015 at 12:57 | Permalink

    Philip – that makes little sense. The argument is that money spent on duty (and on the VAT on that duty) can’t be spent elsewhere (which is true). However, if there was no duty so that the money could be spent elsewhere, then (in most cases) VAT would be levied on that alternative spending. Therefore, the difference in revenue to the government due to alcohol duty is purely down to the duty itself, not the VAT levied on that duty.

  5. Posted 07/09/2015 at 15:59 | Permalink

    true – I was thinking of the price distortion rather than the difference in revenue.

  6. Posted 07/09/2015 at 17:10 | Permalink

    HJ,

    It depends what question you’re trying to answer. If the question is ‘how much do drinkers pay in alcohol-specific taxes?’ the answer is £12 billion.

    If the question is ‘how much extra tax does the government get as a result of alcohol duty, which it wouldn’t get if alcohol duty did not exist?’ then the answer is… we don’t know. There’s no way of telling how people would spend the money in that scenario – some would be saved, some would be spent on food, some would be spent on VAT-able goods.

    The same could be said of any tax. It could be said of some portion of the alcohol duty itself. You could say that drivers don’t really pay £190 for a tax disc because the money would be spent on VAT-able goods if it wasn’t spent on road tax. It seems to me that you can go round in circles forever when you start thinking like that

    The rationale for including VAT on the alcohol duty isn’t so much it would never be clawed back by the government otherwise, rather it is that it is part of the alcohol-specific tax. If alcohol wasn’t targeted for moral/health reasons, it would still have VAT charged on it, but it wouldn’t have additional VAT charged on the sin tax. The VAT on the alcohol duty is therefore part of the sin tax.

  7. Posted 08/09/2015 at 07:14 | Permalink

    @Chris Snowdon – the question is indeed ‘how much extra tax does the government get as a result of alcohol duty, which it wouldn’t get if alcohol duty did not exist?’ if you are arguing (as you are) that drinkers are net contributors because of their alcohol consumption. It is indeed, perfectly possible to make educated estimates of the tax revenue if money were spent on other things or saved – you just haven’t done it. Therefore my point is entirely valid and your objection seems to me to be entirely spurious. It is the EXTRA tax versus the cost to taxpayers that is the whole point that your paper is discussing.

  8. Posted 08/09/2015 at 11:22 | Permalink

    It can’t be done and I wouldn’t do it even if I could because it’s a silly idea which is never applied to other forms of taxation, and rightly so. Nobody claims that people don’t *really* pay x amount in income tax or y amount in car tax on the basis that some of the money would be taxed otherwise. You could do down that road in ever decreasing circles.

    The fact is that there are costs the government has to pay as a result of alcohol and there are taxes placed on alcohol to pay for them. I don’t include VAT on the product (as opposed to on the duty) because that would be charged as a general sales tax even if the product was not associated with costs to public services.

  9. Posted 08/09/2015 at 11:40 | Permalink

    @Chris Snowdon – It’s a perfectly possible and reasonable – and the only sensible – thing to estimate if you really want to look at the extra revenue gained from alcohol duty compared to the costs incurred. Your claim that “it can’t be done” is nonsense – it is perfectly possible to estimate, but not to calculate precisely.

    Nobody has ever claimed that alcohol duty is hypothecated – it was you who chose to compare the two and if you do so it would help if your methodology were logical – which it currently isn’t. Your comment that “you could go down that route in ever decreasing circles” is simply a throwaway line that you cannot justify with reference to any logic.

  10. Posted 08/09/2015 at 11:45 | Permalink

    @Chris Snowdon – You may not have noticed that (above) Philip Booth has admitted that what I said is true and that when he made his comment he was thinking of the price distortion rather than the difference in revenue. So both Philip and I disagree with you. Time to admit you were wrong, may I suggest?

  11. Posted 08/09/2015 at 11:50 | Permalink

    actually, I then became rather uncertain myself after I wrote the comment which is why I asked Chris to continue the debate. I shall continue to think about it

  12. Posted 08/09/2015 at 12:01 | Permalink

    Let’s say I drink a bottle of wine and the cost that I impose on the government is £1. Then, surely the government should impose on me a £1 charge – not £1 plus VAT. The purpose of the charge is firstly to bring into line marginal social costs and benefits (which may, by the way, be different from average social costs and benefits – a subject not discussed in the paper) and secondly to ensure that the revenue is there to pay the costs. It seems to me irrelevant that the government would have received the VAT if that £1 had been spent on something else – perhaps not quite irrelevant but straining the point. Effectively we are saying that the government not only wants compensation for the cost of drinking but compensation for the tax foregone if the drinker had spent that money on a VATable consumer good. By the same argument, the government should charge me VAT when I give money to charity or pay speeding fines. I can see both sides of this though: on the other hand, the social cost of drinking involves VAT revenue foregone because if the person were not spending the money repaying the social cost he would have spent money on something that was VATable. But that seems to presuppose a right to the government to necessarily receive taxes that I would not concede.

  13. Posted 08/09/2015 at 13:36 | Permalink

    @Philip – Alcohol duty is not a hypothecated tax. Nevertheless, Chris Snowdon decided to look at the additional revenue gained by the government from fuel duty versus the additional costs (to government) associated with alcohol consumption. If he is going to make this comparison, then on the revenue side it is necessary to look not only at the revenue they receive due to alcohol duty but to subtract from this revenue they would be receiving anyway but don’t receive from other spending because people spend the money on alcohol duty instead. Only by doing this can the net revenue impact to government be calculated and from this the net cost (or surplus) of alcohol consumption.

  14. Posted 08/09/2015 at 13:41 | Permalink

    @Philip – Just to add to my previous comments. The argument that Philip now presents is a moral one – fair enough. However, I was not commenting on the moral argument, merely the actuarial one.

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