Tax Hikes Do Not Slow Down Drinking in Australia

May 27, 2013 Taxation in Australia

alcohol consumption in AustraliaSYDNEY – Australia’s attempt to use tax hikes to lower the levels of alcohol consumption amongst youths has only led to a sharp spike in the consumption of spirits and a multi-million dollar boost to tax collections.

On May 27th the Royal Australian and New Zealand College of Psychiatrists released the results of a new study which showed that the recent hike to taxes on selected alcoholic beverages in Australia has had virtually no effect on reducing the overall instance of teenage binge drinking, and has actually led to an increase in the consumption of hard spirits.

In 2008 the Australian government enacted a 70 percent hike to the excise taxes charged on pre-mixed alcoholic beverages, bringing the charged tax rate in line with the taxes applied to spirits.

The results of the research indicate that while the tax did lead to a 31 percent decline in the consumption of the pre-mixed drinks amongst youths, but the decrease was counteracted by a 20 percent increase in the consumption of pure spirits.

Despite the tax not having the intended effect of reducing alcohol consumption and mitigating the damaging effects of alcohol abuse amongst young people, the government did still see a AUD 4.5 million boost in tax collections from the tax over the last five years.

Explaining why the tax did not work, the lead researcher for the study Steve Kisely said “…if teenagers are looking for a good time and find their favorite tipple of alcopops has doubled in price, they’re not going to go home and have a hot mug of chocolate… they’re going to find something else- it’s generally spirits.”

Photo by DeeAshley