Governments have long used taxation to correct for the socially costly overconsumption of alcohol, but as the external cost of overconsumption varies across drinkers, a single tax rate is not optimal. This column argues that variation in preferences for different products and in price responsiveness across heavy and light drinkers provides scope to improve welfare by varying tax rates across alcohol products. The proposed framework is well suited to addressing other sources of external costs, such as obesity.
Authors
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Research Fellow University of Wisconsin
Martin, previously Deputy Research Director, is a Research Fellow at IFS and Professor of Economics at the University of Wisconsin.
Research Fellow London School of Economics
Kate is an IFS Research Fellow and an Assistant Professor at LSE, interested in public finance, industrial organisation and applied microeconomics.
Report details
- Publisher
- VoxEU
Suggested citation
R, Griffith and M, O'Connell and K, Smith. (2017). Designing alcohol taxes: Evidence from the UK market. London: VoxEU. Available at: https://ifs.org.uk/publications/designing-alcohol-taxes-evidence-uk-market (accessed: 25 April 2024).
Grant
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