The distributional and corrective implications of alcohol ...

The distributional and corrective implicationsof alcohol price policies

Rachel Griffithjoint work with Martin O’Connell and Kate Smith

DavisApril 2019

Motivation

I Large array of policies aim at reducing harm from excess alcoholconsumption

I Policies that raise prices, through taxes and regulations, are oneimportant policy

I Externalities and internalities lead to over consumption

I Policies aim to reduce this excess consumption

I where they raise the price of non-externality generatingconsumption this incurs a welfare loss

I this may be small on each individual but it can be large in aggregate

Social costs associated with alcohol

Health costs of alcohol consumption:

I e.g. roughly 70% of liver cirrhosis is attributable to alcohol

Violence and crime:

I some estimates suggest that almost half of all violent crime isalcohol related

I around 1/3 domestic violence occurs when the perpetrator isunder the influence of alcohol

I the alcohol attributable fraction of road traffic deaths is 16.6% formen and 6.7% for women

Motivation

I There are many different form of taxes and regulations

I taxes per litres/gallon and ad valorem taxes (on price) are the mostcommon

I few countries use specific taxes on alcohol content

I recently some countries have introduced minimum unit prices

I How effective are existing policies at reducing consumption thatleads to externalities/internalities?

I Will proposed reforms in Europe (and the US) make taxes bettertargetted?

I What will be the revenue implications?

How well targeted is policy?

I A policy is well targeted if it reduce purchases most by thosewhose marginal consumption creates the large externalities

I in the case of alcohol these are overwhelmingly heavy drinkers

I In order to understand how well targeted is policy we need toknow:

I something about the scale of marginal externalities, how convexthey are and how they vary across individuals

I how policy feeds through to prices

I the shape of demand and how that varies across individuals

Alcohol consumption is concentratedWe assume that marginal externalities are as well

(a) UK

Gini coefficient = 0.69

020

4060

8010

0C

umul

ativ

e sh

are

(%)

of a

lcoh

ol c

onsu

mpt

ion

0 20 40 60 80 100

Cumulative share (%) of peoplefrom lightest to heaviest drinkers

(b) US

Gini coefficient = 0.60

020

4060

8010

0C

umul

ativ

e sh

are

(%)

of a

lcoh

ol c

onsu

mpt

ion

0 20 40 60 80 100

Cumulative share (%) of peoplefrom lightest to heaviest drinkers

Source: UK Health Survey for England 2011; US National Health and Nutrition Survey 2007–2012.

Ethanol consumption, frequency and binge drinking(a) UK: frequency of drinking

02

46

8Fre

quen

cy o

f dri

nkin

g (d

ays

per

wee

k)

0 10 20 30 40Drinks per week

(b) US: frequency of drinking

12

34

5Fre

quen

cy o

f dri

nkin

g (d

ays

per

wee

k)


(c) UK: binge drinking

0.2

.4.6

.81

Pro

pens

ity

to b

inge

dri

nk


(d) US: binge drinking

0.5

11.

5Fre

quen

cy o

f bin

ge d

rink

ing

(day

s pe

r w

eek)


Source: UK Health Survey for England 2011; US National Health and Nutrition Survey 2007–2012.

Variation in the marginal externality/internality

Evidence suggests that externalities are convex in alcohol consumption

I the more you drink the greater the external cost associated withone more drink

I threshold effect with some diseases: at low levels of alcoholconsumption the risk is not elevated, but this risk increases sharplyabove a certain point

I higher levels of alcohol consumption create an exponential risk ofaccidents: odds of injury from 8 pints almost 18 times greater thanthe odds of injury from 1 pint

I It could also be that some people generate more externality (forany given level of drink) than others

Targeting and tagging of fiscal policy

I In an ideal world we would “tag” individuals and drink occasions,charging each a tax rate equal to their marginal externality(Akerlof, 1978)

I Ethanol is bundled together in products with other characteristicsand consumers have preferences over all these characteristics

I If consumer preferences over alcohol products and their overallethanol demand are correlated we can potentially use this to “tag”them and better target a tax

Heavy drinkers buy cheaper products

(a) Mean price per unit

.4.4

5.5

.55

Mea

n pr

ice

(GB

P p

er u

nit)

0 10 20 30 40 50Household's average (across year) units per adult per week

(b) Share of units bought below 45p/unit

.4.5

.6.7

.8S

hare

of u

nits

bou

ght b

elow

45p

per

uni

t


Unit: a unit is 10ml of ethanolSource: Kantar Worldpanel 2010-2011

Heavy drinkers buy stronger products

(a) Mean ABV of units purchased

1012

1416

18M

ean

alco

hol s

treng

th (A

BV

%)


(b) Share of units from segments

.51

1.5

2

Sha

re o

f uni

ts (i

ndex

ed to

1 a

tle

ss th

an 2

uni

ts p

er a

dult

per w

eek)


Beer Wine Spirits Cider

ABV: Alcohol By VolumeSource: Kantar Worldpanel 2010-2011

Current policies are not well targetted

I ideally we would have a specific tax on ethanol content:

pzj = cj + τ zzj

I best targeted, but not so common

I Volumetric tax:pv

j = cj + τ v vj

I Ad valorem tax:pa

j = (1 + τa)cj

j : alcohol productscj : pre-tax price of product jvj : the volume (in litres) of product jzj : units of ethanol (a unit is 10 ml of ethanol) in product j

Minimum unit prices (MUP)

I Make it illegal to sell below a price floor, p, set per unit of ethanol

I each product faces a price floor which is proportional to the numberof units of alcohol it contains

I in the absence of tax the price floor for product j is:

pmj = max

{cj ,pzj

}I In practice these policies are typically combined

I e.g a minimum unit price applied to a product that is subject to avolumetric tax plus an ad valorem tax (applied to the price inclusiveof the volumetric tax) would imply a price:

pmj = max

{(1 + τa)(cj + τ v vj),pzj

}

UK volumetric and specific taxes on alcohol

0.2

.4.6

.8Ex

cise

dut

y pe

r 10m

l of e

than

ol (G

BP)

0 10 20 30Alcohol by volume (%)

Beer Cider Wine Spirits

Note: General VAT rate also applies to alcoholic beverages

US volumetric and specific taxes on alcohol

(a) US federal and median state

010

2030

40Ex

cise

dut

y pe

r 10m

l of e

than

ol (U

SD)

0 10 20 30 40Alcoholic strength (ABV %)

Beer Wine Spirits

(b) US federal and California

010

2030

Exci

se d

uty

per 1

0ml o

f eth

anol

(USD

)

0 10 20 30 40Alcoholic strength (ABV %)

Beer Wine Spirits

Note: General and additional sales taxes also applies to alcoholic beverages and vary by State

Estimate demand

I Recall that, if consumer preferences over alcohol products iscorrelated with their overall ethanol demand, then we canpotentially use this to better target a tax

I We need estimates of individual demand for different alcoholproducts to understand whether this will be feasible

I in earlier work – Griffith, O’Connell and Smith (2018, JPubE) – weconsidered (constrained) optimal tax problem

I here we consider recent and proposed policy reforms anddistributional considerations

I we estimate a discrete choice demand model, lots of heterogeneityin preferences, this is important to capture potential correlations,and include income to study distributional consequences

Estimate demand - data on households

I Kantar Worldpanel, market research data

I alcohol purchased and brought home for consumption

I 11,634 households over 2010-2011

I everything we do is per adult member of the household

I heterogeneity in preferences

I use data over one year (2010) to establish whether adults in thehousehold are habitually light/medium/heavy drinkers

I use 2011 to estimate demand

I split by income terciles - low/moderate/high income

Distribution of alcohol purchases across householdsLight

drinkersModeratedrinkers

Heavydrinkers

0.0

5.1

.15

Fra

ctio

n of

hou

seho

lds

0 10 20 30 40Household's average (across year) units per adult per week

Source: Kantar Worldpanel 2010

... by income

Lightdrinkers

Moderatedrinkers

Heavydrinkers

0.0

5.1

.15

.2

Fra

ctio

n of

hou

seho

lds

withi

n ea

ch in

com

e gr

oup

0 10 20 30 40Household's average (across year) units per adult per week

Low income Middle incomeHigh income

Source: Kantar Worldpanel 2010

Estimate demand - data on products

There are 7000+ alcohol UPCs (barcodes) and 3000 brands

I estimating a full choice model is infeasible

I we aggregate to 70 choices

I 32 “products” available in different sizes plus an outside option tonot purchase

I focus on the margins of substitution that are most relevant to ourapplication

I we capture heterogeneity in the shape of demand for sets of UPCsthat are impacted similarly by policy reforms

Product definition and characteristics

(1) (2) (3) (4) (5) (6)Product Top brand and No. Mean Market No.definition within-product share (%) brands ABV share (%) sizes

Beer

Premium beer; ABV < 5% Newcastle Brown Ale (6.1) 386 4.4 1.8 3Premium beer; ABV ≥ 5% Old Speckled Hen (16.5) 238 5.5 2.1 3Mid-range bottled beer Budweiser Lager (19.6) 94 4.7 4.6 3Mid-range canned beer; ABV < 4.5% Carlsberg Lager (28.8) 17 3.9 5.8 3Mid-range canned beer; ABV ≥ 4.5% Stella Artois Lager (72.0) 15 5.0 2.7 3Budget beer John Smiths Bitter (23.6) 72 4.2 3.2 3

Wine

Red wine Tesco Wine (6.2) 439 12.6 18.4 4White wine Tesco Red Wine (7.8) 327 12.1 17.1 4Rose wine Echo Falls Wine (8.6) 67 11.5 4.2 2Sparkling wine Lambrini Sparkling Wine (8.4) 125 9.2 3.1 2Champagne Lanson Champagne (12.7) 42 11.8 0.8 1Port Dows Port (22.0) 23 19.8 0.7 1Sherry Harveys Bristol Cream (18.7) 25 16.8 1.2 1Vermouth Martini Extra Dry (11.8) 33 15.0 0.6 1Other fortified wines Tesco Fortified Wine (21.8) 37 14.6 0.9 1

Product definition and characteristics

(1) (2) (3) (4) (5) (6)Product Top brand and No. Mean Market No.definition within-product share (%) brands ABV share (%) sizes

Spirits

Premium gin Gordons Gin (59.6) 21 38.3 1.6 2Budget gin Tesco Gin (22.3) 15 38.3 1.3 2Premium vodka Smirnoff Red Vodka (39.0) 54 37.6 3.1 2Budget vodka Tesco Vodka (31.4) 17 37.5 1.8 2Premium whiskey Jack Daniels Bourbon/Rye (19.6) 80 40.5 2.1 2Budget whiskey Bells Scotch Whiskey (18.7) 56 40.0 8.1 2Liqueurs; ABV <30% Baileys (25.9) 203 18.4 3.1 2Liqueurs; ABV ≥30% Southern Comfort (27.2) 41 37.0 0.8 2Brandy Tesco Brandy (22.1) 55 37.3 2.4 2Rum Bacardi White Rum (29.1) 58 37.1 2.0 2Pre-mixed spirits Gordons Gin+Tonic (14.7) 43 6.1 0.2 1Alcopops Smirnoff Ice Vodka Mix (17.3) 147 4.8 0.8 1

Cider

Apple cider, <5% ABV Magners Original Cider (26.9) 52 4.4 1.6 3Apple cider, 5-6% ABV Strongbow Cider (63.1) 49 5.3 2.0 3Apple cider, >6% ABV Scrumpy Jack Cider (18.7) 71 7.0 0.8 2Pear cider Bulmers Pear Cider (24.2) 33 4.9 0.7 2Fruit cider Jacques Fruit Cider (21.4) 48 4.4 0.5 2

Product sizes and prices

(1) (2) (3) (4) (5)Product Mean Mean Mean pricedefinition Size quantity (L) price (£) per unit (£)

Beer

Premium beer; ABV < 5% 500ml 0.51 1.61 0.711-2L 1.31 3.91 0.652.5-8L 3.78 9.08 0.58

Premium beer; ABV ≥ 5% 500ml 0.52 1.84 0.611-2L 1.35 4.21 0.572.5-10L 3.70 10.30 0.51

Mid-range bottled beer 1-2L 1.43 3.50 0.532.5-4L 3.07 6.87 0.485-14L 6.78 13.40 0.43

Mid-range canned beer; ABV < 4.5% 2-5L 3.47 6.18 0.457-10L 8.39 13.23 0.4015-25L 14.93 20.50 0.39

Mid-range canned beer; ABV ≥ 4.5% 1-3L 1.96 4.55 0.464-6L 4.26 8.80 0.418-20L 9.16 16.52 0.38

Budget beer 2-4L 2.04 3.62 0.424-6L 4.57 7.51 0.428-20L 8.72 12.98 0.41



Wine

Red wine 1x750ml 0.72 4.57 0.512x750ml 1.23 7.96 0.503x750ml 1.83 11.75 0.484x750ml 3.11 18.69 0.47

White wine 1x750ml 0.72 4.45 0.512x750ml 1.26 7.90 0.503x750ml 1.81 11.28 0.494x750ml 2.90 17.10 0.47

Rose wine 1x750ml 0.71 4.23 0.522x750ml 1.81 10.40 0.49

Sparkling wine 1x750ml 0.74 5.01 0.702x750ml 2.12 9.71 0.52

Champagne 1-2x750ml 1.08 24.51 1.82Port 1-2x750ml 0.85 8.74 0.52Sherry 1-2x750ml 1.13 7.87 0.42Vermouth 1-2x750ml 1.18 6.88 0.40Other fortified wines 1-2x750ml 1.20 6.53 0.40



Spirits

Premium gin 1x700ml 0.68 11.96 0.462x700ml 1.14 17.75 0.42

Budget gin 1x700ml 0.74 9.68 0.342x700ml 1.38 12.87 0.27

Premium vodka 1x700ml 0.67 10.54 0.422x700ml 1.15 16.39 0.39

Budget vodka 1x700ml 0.57 7.73 0.362x700ml 1.14 14.01 0.34

Premium whiskey 1x700ml 0.67 19.71 0.732x700ml 1.28 29.65 0.65

Budget whiskey 1x700ml 0.65 11.02 0.422x700ml 1.17 16.18 0.40

Liqueurs; ABV <30% 1x700ml 0.64 7.84 0.682x700ml 1.26 15.94 0.66

Liqueurs; ABV ≥30% 1x700ml 0.62 13.90 0.612x700ml 1.18 19.60 0.47

Brandy 1x700ml 0.62 10.95 0.472x700ml 1.11 17.18 0.44

Rum 1x700ml 0.78 12.21 0.422x700ml 1.50 18.67 0.37

Pre-mixed spirits 700ml 0.67 4.15 0.93Alcopops 1.3L 1.30 5.95 0.87



Cider

Apple cider, <5% ABV 1L 0.91 2.56 0.622-3L 2.51 4.26 0.396-10L 6.61 10.32 0.38

Apple cider, 5-6% ABV 1-2L 1.58 2.82 0.344L 3.86 5.74 0.2810-14L 9.13 11.01 0.27

Apple cider, >6% ABV 1-2L 1.18 3.35 0.403-9L 4.19 6.88 0.27

Pear cider 1L 0.92 2.49 0.563-6L 3.86 7.61 0.42

Fruit cider 750ml 0.68 2.52 0.811-3L 1.93 6.67 0.76

What about alcohol purchased out of the home?

Source: Living Costs and Food Survey

What about alcohol purchased out of the home?

0.1

.2.3

.4.5

Shar

e of

alc

ohol

con

sum

ed o

ut o

f the

hom

e

Once o

r twice

a ye

ar

Once e

very co

uple

of mon

ths

Once o

r twice

a mon

th

Once o

r twice

a week

Three

or fou

r day

s a w

eek

Five

or si

x day

s a w

eek

Almost

every

day

Frequency drank any alcoholic drink in the last 12 months

Source: National Diet and Nutrition Survey

Demand model – utility

Households (i) choose which product-size (j , s) to purchase in week t ,with option to purchase no alcohol (0,0)

Utility:uijst = ν(pjsrt ,xjst ;θi) + εijst

pjsrt : pricexjst : vector of option characteristicsθi : vector of household level preference parametersεijst : idiosyncratic shock, i.i.d. type I extreme value

Utility from no purchase is normalised to:ui00t = εi00t

Demand model – utility

ν(pjsrt ,xjst ;θi)

= αipjsrt + βiwj +4∑

m=1

1[j ∈Mm] · (γim1zjs + γim2z2js) + ξijt .

pjsrt : price, product (j) - size (s) - region (r) week (t)wj : alcoholic strength (ethanol per volume)zj : ethanol – quadratic that can vary over segments (beer, wine, spiritsand cider)ξijt : household specific time varying unobserved product attribute

Demand model – preferencesI We distinguish 9 demographic groups, d = 1, . . . ,9

I light/moderate/heavy drinkers based on purchases over prior year

I low/medium/high income

I all preferences vary across these (9 groups)

I random coefficients on price, strength and ethanol – theparameters (means and standard deviations) of the distributionvarying across demographic groups

I unobserved preferences ξijt = ηij + χd(i)kt

I ηij is a time-invariant product effect, including a product effect thatvaries by demographic group and an individual specific product type(beer, wine, spirits, cider) random coefficient

I χikt is an alcohol type time effect that varies across demographicgroup

Identification of price effects

I we want to isolate causal impact of price on demand

I we absorb a lot of the demand shocks that might be correlated withprices through controls for observed and unobserved effects

I We instrument using a control function based on:

I tax rates detail

I exchange rates and producer prices detail

I retail wages index detail

I to focus on price variation driven by cost shifters

Price elasticities(a) Mean own price

-6-5

-4-3

-2M

ean

own

pric

e el

astic

ity

Light drinkers Moderate drinkers Heavy drinkers

Low income Medium income High income

(b) Mean cross price

0.0

5.1

.15

Mea

n cr

oss

pric

e el

astic

ity


Low income Medium income High income

detail own detail cross

I heaviest drinkers are most responsive to prices and most likely tosubstitute towards other alcohol products - particularly lowerincome heavy drinkers

I the overall price elasticity of demand for ethanol for heavy drinkersis lower than for light drinkers

Policy reforms

I The current tax systems in the UK is poorly targeted at heavydrinkers (e.g. higher alcohol strength products are taxed less perunit of ethanol than lower strength products)

I We consider three potential reforms of the UK system

I introduction of a minimum unit price of 45p/unit, keeping specificand ad valorem taxes as they are

I reform of specific taxes to tax on ethanol at two rates, keeping advalorem taxes as they are

I increase in ad valorem tax rate from 20% to 31.5%, keeping specifictaxes as they are

I plus combinations of these policies

I We select the rates to achieve the same average reduction(around 1.15 unit per per adult per week)

Minimum unit price

I Scotland and Ireland have recently introduced minimum unitpricing of alcohol

I in Scotland prior to its introduction more than two thirds of alcoholbought in supermarkets and retailers was priced below theminimum price

I policy expected to increase prices of these products by at least35%, on average Griffith, O’Connell and Smith (2017)

I A minimum unit price raises the price of cheap alcohol, which isdisproportionately purchased by the heaviest and lowest incomedrinkers

Minimum unit price - distribution of price per unit

0.0

2.0

4.0

6.0

8S

hare

of t

rans

actio

ns

0 50 100 150Price (p/unit)

Source: Kantar Worldpanel 2010-2011

Share of units bought below 45p/unit, by incomeLight

drinkersModeratedrinkers

Heavydrinkers

.2.4

.6.8

Shar

e of

uni

ts b

ough

t be

low

45p

per

uni

t


Low income Middle incomeHigh income

Source: Kantar Worldpanel 2010-2011

Two-rate tax reform

010

2030

40E

xcis

e du

ty (

p pe

r un

it o

f eth

anol

)

0 10 20 30 40Alcohol by volume (%)

All alcohol

Corrective implications of policy reforms

-3-2

-10

Cha

nge

in u

nits

per

adu

lt pe

r wee

k


Minimum unit price Two-rate excise tax Ad valorem increase

Change in units from Minimum Unit Price

Change in units from 2 rate reform

Change in units from ad valorem rate increase

Aggregate implications of policy reforms

-1,0

00-5

000

500

Cha

nge

(£ m

illio

n)

Consumer surplus Industry revenue Tax revenue


Aggregate implications of policy reforms

MUP Two rate reform

Consumer surplus -653.6 -495.0Industry revenue 213.5 -60.6Tax revenue -550.2 -618.2of which:Duty revenue -494.1 -505.1

Mechanical 0 843.3Switching -494.8 -1348.7

VAT revenue -56.1 -113.1Mechanical 148.9 168.7Switching -208.8 -281.2

Notes: £million per year.

Effects of policy reforms

I How well targeted?

I Minimum unit price and a two-rate reform achieve similar reductionsin units purchased across light, moderate and heavy drinkers

I an increase in ad valorem taxes is less well targeted, leading tohigher reduction amongst light and lower amongst heavy drinkers

I What are the revenue implications?

I Minimum unit price and two rate reform both reduce tax revenuesrelative to the current UK tax system, reflecting their better successat discouraging drinking

I Under minimum unit price some of that is shifted to industry, andconsumer surplus declines by more compared with two-rate reform

I an increase in ad valorem taxes raises some revenue but leads tolarge reductions in consumer surplus and industry revenue

Concerns about regressivity of corrective taxes

I A common concern about excise duties is that they are regressive

I Ultimately what matters for meeting distributive goals is thedistributional impacts of the tax and benefit system as a whole,not the progressivity or regressivity of any single tax:

I excise taxes are an effective way of tackling externalities as theyalter the relative prices consumers face

I policy makers can offset the regressivity of corrective taxes throughadjustments to other parts of the system

I understanding the distributional impact of excise taxes is importantto understand how to do this

Distributional implications of policy reforms

-150

-100

-50

0C

hang

e in

con

sum

er s

urpl

us (£

per

hh

per y

ear)

Low income Middle income High income


Summary

I Minimum unit prices and corrective taxes are both effectiveinstruments for reducing externalities in alcohol markets

I Miniumum unit prices have the disadvantage that they transferrevenue to industry and they are regressive

I Ad valorem taxes are badly targeted and increasing them (fromcurrent UK levels) will raise only small amounts of revenue

I These policies can be effectively combined, and reforms to taxesin combination with minimum unit prices might be the best policy

I To better understand optimal policy we would need to have bettermeasures of externalities at the individual level

Thanks!

Instruments - tax changes in 2011 Back

Segment Applies to products: Rate changes (month)

Beer 1.8-2.8% ABV +1.25 (March); -9.28 (Oct)2.8-7.5% ABV +1.25 (March)>7.5% ABV +1.25 (March); +4.64 (Oct)

Wine 5.5-15% ABV (still) +16.23 (March)15-22% ABV (still) +21.64 (March)5.5-8.5% ABV (sparkling) +15.72 (March)8.5-15% ABV (sparkling) +20.79 (March)

Spirits 0-100% ABV +1.72 (March)Cider 1.2-7.5% ABV -0.14 (March)

7.5-8.5% ABV -0.17 (March)

Instruments - exchange rates and producer prices Back

(a) Exchange rates

1.56

1.58

1.6

1.62

1.64

USD

-GBP

1.12

1.14

1.16

1.18

EUR-

GBP

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

EUR-GBP exchange rate USD-GBP exchange rate

(b) Factory gate prices for beer andcider

100

102

104

106

108

110

Fact

ory

gate

pric

e in

dex

(Jan

201

0 =

100)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Factory gate price of beer Factory gate price of cider

Instruments - local economic conditions (wages) Back

Retailer coverage in different regions

Tesco Sainsbury’s Asda Morrisons Discounter Upmarket Other

North East 19.3 10.0 27.6 18.7 5.9 2.6 16.0North West 27.1 9.8 25.3 14.6 6.0 2.2 15.0Yorkshire and Humber 23.3 9.9 21.3 23.3 4.8 2.5 14.9East Midlands 29.9 13.2 17.8 15.8 5.4 2.6 15.3West Midlands 26.0 15.6 19.6 14.8 6.2 2.8 14.9East of England 39.3 16.5 13.6 9.6 4.2 4.4 12.4London 31.7 26.2 11.9 7.2 3.3 6.4 13.2South East 36.0 22.1 14.1 7.5 3.8 5.6 11.0South West 34.5 17.4 14.9 11.4 6.0 4.2 11.5Wales 34.0 6.8 22.1 12.1 7.7 2.3 14.9Scotland 30.8 7.4 22.5 15.8 6.5 2.8 14.1

Product own price elasticities

Back

Product cross price elasticities

Back

Combinations of MUP and tax reform

Two-rate taxes (p/unit)

MUP (p) <20% ABV ≥20% ABV

30.0 18.8 37.532.5 18.8 37.535.0 18.7 37.437.5 18.6 37.140.0 18.2 36.342.5 17.4 34.845.0 16.2 32.4

Effect on units purchased by heavy relative to lightdrinkers

67

89

10

Red

uctio

n in

uni

ts p

urch

ased

by

heav

y dr

inke

rs/

redu

ctio

n in

uni

ts p

urch

ased

by

light

drin

kers

30 35 40 45Value of MUP

(tax rates adjusted so aggregate decline in units held constant)

MUP + two-rate excise tax Two-rate excise tax only

Change in tax revenues by segment

MUP Two rate reform

VAT

Beer -40.8 26.0Wine 66.6 90.9Spirits -54.5 -201.9Cider -31.3 -27.6

Duty

Beer -203.5 71.0Wine 140.5 124.8Spirits -352.0 -768.21Cider -79.8 -67.0

Notes: £million per year.

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