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Alcohol taxation policy in Australia: public health imperatives for action

Steven J Skov, for the Royal Australasian College of Physicians Alcohol Advisory Group
Med J Aust 2009; 190 (8): 437-439. || doi: 10.5694/j.1326-5377.2009.tb02494.x
Published online: 20 April 2009
Alcohol tax policies are cost-effective

Beyond being effective in reducing alcohol consumption and related harms, controlling price through taxation measures is also considered to be highly cost-beneficial. Collins and Lapsley recently examined the potential cost savings for Australia of a range of interventions aimed at reducing alcohol-related harm.12 They found strong evidence from a variety of settings for the effectiveness of taxation measures in reducing consumption and subsequent harms. Based on the experience of three other broadly similar countries (Norway, the United States and Italy), they estimated that taxation measures could reduce the social costs of alcohol in Australia by between 14% and 39% (or between $2.19 and $5.94 billion in 2004–05 dollars). Another study also examined the cost-effectiveness of a range of interventions and found that volumetric taxation of alcohol (ie, according to the alcohol content) had the lowest intervention costs and provided the greatest benefits in terms of disability-adjusted life years.13

A public health-centred alcohol tax policy

The current alcohol tax system is complex, unwieldy and mainly reflects economic and commercial factors (with the exception of the recent “alcopops” tax). Alcohol tax policy should be strongly informed by public health considerations. Several important measures could be considered:

The Australian Government’s alcopops legislation has been criticised as a “tax grab” by some politicians and the alcohol industry. Any future changes to tax policy likely to benefit public health would also be in the nature of tax increases and would probably suffer the same criticism. This criticism could perhaps be mitigated if the generally large disparity between government revenue from alcohol taxes and government expenditure on alcohol harm-prevention and treatment programs was reduced. The government’s announcement of substantial funding for a range of preventive health measures — apparently using alcopops tax revenue — is a welcome step, especially if the two are formally linked.15

A large proportion of Australians would probably support increases in alcohol taxes if they were confident that at least some of the funds went into alcohol programs. The 2007 National Drug Strategy Household Survey found that 24% of respondents supported an increase in the price of alcohol per se, but over 40% were in favour of increased alcohol taxes to pay for alcohol harm-prevention and treatment programs.3 During the LWA program in the NT, revenues from the alcohol levies were hypothecated to the program, which contributed greatly to the quantum and sustainability of funding16 and was considered to have been particularly important in public support for the program (Dr Shirley Hendy, former Director, LWA program, personal communication).

Concerns are sometimes raised that alcohol price increases discriminate against those on low incomes or would not be effective in reducing consumption for particular groups such as Aboriginal people. However, low-income groups and Aboriginal people suffer disproportionately from alcohol-related harms.17,18 Cheap cask wine was, along with beer, the drink of choice in most NT Aboriginal communities at the time of the LWA program, and the levy was effective in reducing consumption. Indeed, the recommendations in this article are entirely consistent with those of the Aboriginal Medical Services Alliance NT in their proposal to address alcohol-related harm.19

Has the alcopops tax worked?

There is not yet much evidence to judge the effect of the tax. The Distilled Spirits Industry Council of Australia commissioned Access Economics to study the impact of the tax on alcohol-related emergency department presentations.20 Their report concluded that there was no evidence that such events had declined since the introduction of the alcopops tax, and suggested there may even have been an increase. However, an independent review of the Access Economics report noted the inappropriate study design and statistical analysis, and re-examination of the data showed that any increase in presentations after the tax was consistent with an increasing trend over some years before the tax.21

On the other hand, alcohol sales data from the Nielsen Liquor Services Group, reported by Chikritzhs and colleagues, show a substantial fall in the sales of ready-to-drink beverages in the 3 months following the introduction of the tax, with a smaller shift to other beverages (beer and spirits) and a net reduction in overall sales.22 Although not conclusive, these observations are consistent with what would be predicted on the basis of international research evidence,8 and suggest that the tax is a move in the right direction.

  • Steven J Skov
  • for the Royal Australasian College of Physicians Alcohol Advisory Group

  • Royal Australasian College of Physicians, Darwin, NT.


Correspondence: steven.skov@nt.gov.au

Acknowledgements: 

I am indebted to the Advisory Group members: Bruce Armstrong, Alex Wodak, Nick Walsh, Kate Conigrave and George Rubin, as well as Tanya Chikritzhs, Yvonne Luxford, and John Boffa for their helpful comments on drafts of this article.

Competing interests:

None identified.

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