An analysis of the changes in alcohol consumption and revenue from alcohol taxation during COVID-19 in European union countries

Abstract

Purpose: In most European Union (EU) countries, alcohol consumption is well above the global average, causing substantial health burden in the European population. By increasing excise taxes, several EU countries (like Baltic States) seek to reduce alcohol consumption and attributable health problems as well as increasing budget revenues. Other EU countries (e.g., Germany), however, remain in astate of non-action. In this study, we review how alcohol per capita consumption and alcohol excise tax revenues have changed during the COVID-19 pandemic across the EU, with a focus on the role of tax structure and changes in excise taxes. Methods: We obtained annual data on alcohol consumption and excise taxes from EU countries to calculate two indicators: (1) per capita alcohol consumption, (2) per capita alcohol excise tax revenue. Descriptive analyses and joint point regressions analysis was conducted to investigate how alcohol per capita excise tax revenue have changed during periods of alcohol excise tax increases. We evaluated how the two indicators (consumption and revenue) has developed pre-pandemic and during the pandemic depending on their fiscal approach (i.e. increasing excise tax like in Lithuanian and Poland or keeping excise unchanged like in Germany). Results: Long-term trends suggests that per capita alcohol consumption and per capita alcohol excise tax revenue are highly correlated when taxes remain unchanged. When alcohol excise taxes are increased substantially or repeatedly to account for inflation,per capita alcohol excise tax revenue is increasing while per capita alcohol consumption remains stagnant or decreases. For example,Lithuania has nearly doubled per capita alcohol excise tax revenue since 2014 (first year of a series of tax increases), earning nearly 190€ per adult in 2022 and reducing per capita alcohol consumption. In contrast, per capita alcohol excise tax revenue has remained at about 45€ in Germany during times of no changes to alcohol excise taxes. Preliminary analyses do not show a clear beneficial impact of taxation during the COVID-19 pandemic. Conclusion: By raising alcohol taxes substantially or repeatedly to account for inflation, government revenue from alcohol sales can be increased substantially while alcohol consumption can be lowered.