Equal Tax for Equal Alcohol? Beverage Types and Antisocial and Unlawful Behaviours*

Abstract

Alcohol taxation is an important policy instrument for correcting for market failures associated with excessive alcohol consumption. This paper examines the beverage-specific negative externalities by providing empirical evidence linking ten alcoholic beverage types to drink-driving and hazardous, disturbing or abusive behaviours when intoxicated, using data from six waves of an Australian recreational drug survey. We find that regular-strength beer and pre-mixed spirits in a can rank the highest in their links to negative behaviours, followed by mid-strength beer, cask wine, and bottled spirits. Conversely, drinking low-strength beer or fortified wine reduces the probability of these risky and unlawful behaviours. Bottled wine is shown to be associated with an elevated chance of drink-driving but a reduced chance of other negative behaviours. In contrast to the existing volumetric tax rates for per litre of alcohol, of all harmful beverage types, cask wine appears to be significantly undertaxed relative to its external costs to society. We also note that regular- and mid-strength beer are comparable to pre-mixed drinks in terms of external costs, and yet there is a significant disparity across their tax rates.