
New International Tax and Investment Center Research Reveals Link between Tax and Illicit Alcohol Market Size
The International Tax and Investment Center (ITIC) released new research on illicit alcohol revealing that high tax rates on alcoholic beverages can divert consumers to the illicit alcohol market, which poses a major threat to public health and finances. Experts examined illicit alcohol in Colombia, the Dominican Republic, Malaysia, South Africa, and the United Kingdom to uncover the largest drivers of these illicit markets, which are bad for consumers, communities, and businesses due to their negative social and economic impacts.
In alignment with the OECD’s Illicit Trade in High-Risk Sectors report, the research showed that a significant price difference between the licit and illicit alcoholic beverages is one of the biggest drivers; if consumers struggle to afford legal alcoholic beverages, they will turn to cheaper, illicit ones that can be very dangerous and potentially lethal. Some of the severe consequences of the illicit alcohol market can be observed as recently as in the last two months in Peru and Ecuador, where over 60 deaths between the two countries were reported as a result of the ingestion of illicit alcohol. The research also explored how nations around the world have dealt with illicit alcohol commerce through tax and regulatory policies that lessen the incentives for criminals to engage in illicit alcohol production and trafficking. The study highlights five key findings:
- Lower tax rates can provide a consistent stream of government revenue by discouraging illicit alcohol purchase and consumption, as well as maintaining demand in the legal market.
- Alcohol tax increases should be applied slowly over time to avoid sudden price increases for consumers, as this often drives consumers toward the illicit alcohol market.
- Excise tax policies must consider the size and shape of the illicit alcohol market, consumer purchasing power, the country’s overall fiscal position, and excise rates in neighboring countries to successfully discourage the illegal market.
- Tax systems, industry and cross-border coordination, and smart, focused enforcement can help combat the illicit alcohol market and reduce its prevalence. This is directly supported by the OECD’s research as well, which observes “[T]he link between alcohol policies and the illicit trade is essential and alcohol policies should not be developed in isolation from realities of the local market… the proportionality between the effectiveness of potentially curbing illicit trade, the cost of the remedy, and the potential disruption to legitimate business.”
- The illicit alcohol market fuels crime and erodes the rule of law. In many countries, illicit traders are organized criminal businesses that sell unsafe and unregulated products, deliberately escaping revenue that is rightfully due to governments.
“Sharp tax increases have a strong link to increased activity in the illicit alcohol market, a finding supported by recent OECD research and Euromonitor as well,” explains Dan Witt, president of the International Tax and Investment Center. “These costs are passed on to consumers, which widens the price difference between legal and illegal alcohol. Once the tax increases exceed consumer purchasing power, illegal production blossoms, dangerous products enter the market, and fiscal income dwindles.”
Colombia provides an example of how a wide price difference can drive demand for illicit alcohol and create high levels of social acceptance for purchasing illegal beverages. Due in part to pricing, over 22.8% of the total ethanol consumed in the nation is illicit – a value of over US$1.5 billion, accounting for a fiscal loss of US$678 million. Meanwhile, the Dominican Republic’s 33% market share of illicit alcohol showcases its danger to individuals, with over 500 deaths in the country over the past three years.
“It’s clear that excessive alcohol taxation fuels crime while harming the legal domestic industries whose taxes contribute to essential government services,” states Witt. “Smart taxation is key here. Our findings support the idea that well-calibrated alcohol taxation policies that understand and target the illicit market will result in a reduced presence of illegal alcohol, increased tax collections for governments, improved public safety, and a level competitive field for alcohol companies. In short, this is a critical way for governments to reduce fiscal loss and, far more important, avoid needless and preventable death and injury.”
The full academic article, published in the latest edition of the World Customs Journal (Vol. 16, Number 2, September 2022) is currently available to Members of the International Network of Customs Universities (INCU).
More about ITIC
The International Tax and Investment Center (ITIC) is an independent, nonprofit research and education organization founded in 1993 to promote tax reform and public-private initiatives to improve the investment climate in transition and developing economies. ITIC serves as a clearinghouse for information on best practices in taxation and investment policy. ITIC encourages tax, trade and investment policies that enhance economic growth in non-OECD countries by facilitating mutual understanding and trust between business and governments.
To view this piece of content from cts.businesswire.com, please give your consent at the top of this page.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221129005010/en/
Contact information
Diana McKelvey
dmckelvey@iticnet.org
1 (202) 530-9799
About Business Wire
(c) 2018 Business Wire, Inc., All rights reserved.
Business Wire, a Berkshire Hathaway company, is the global leader in multiplatform press release distribution.
Subscribe to releases from Business Wire
Subscribe to all the latest releases from Business Wire by registering your e-mail address below. You can unsubscribe at any time.
Latest releases from Business Wire
H.I.G. Capital Announces the Sale of DGS S.p.A.11.6.2024 12:00:00 CEST | Press release
H.I.G. Capital (“H.I.G.”), a leading global alternative investment firm with $62 billion of capital under management, is pleased to announce that an affiliate has signed a definitive agreement to sell its portfolio company, DGS S.p.A. (“DGS” or the “Group”), a leading firm in the Italian Information Technology market, to DGS Co-Founders and management team in partnership with ICG, a global alternative asset manager. Since its inception in 1997, DGShas supported blue-chip customers in the design, integration, and maintenance of complex IT systems, with a specialization in digital transformation and cybersecurity services. The Group currently has over 1,900 employees, revenues of approximately €300 million, and maintains a group of highly loyal clientele. During H.I.G.’s ownership, DGS has tripled in size and consolidated its position as a leading Italian firm in cybersecurity services and digital transformation. DGS offers its clients sophisticated and proprietary digital transformation
Evertas Names Nick Selby Head of European Underwriting11.6.2024 12:00:00 CEST | Press release
Evertas, the world’s first crypto insurance company, has named Nick Selby as its new Head of European Underwriting. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240611141887/en/ Nick Selby, Executive Vice President and Head of European Underwriting at Evertas (Photo: Business Wire) Selby, an accomplished information and physical security professional, brings two decades of expertise in public and private sector information security, physical security, and complex incident handling, as well as seven years of experience leading teams securing billions of dollars in cryptoassets. Previously, his roles included VP of the Software Assurance Practice at Trail of Bits, Chief Security Officer at Paxos Trust Company, and Director of Cyber Intelligence and Investigations at the NYPD Intelligence Bureau. “Nick is an extremely valuable addition to our European team,” said Evertas CEO and Co-Founder J. Gdanski. “His public and private
Owlet utvider globalt fotavtrykk med lanseringen av medisinsk-sertifisert Dream Sock™ i Storbritannia og over hele Europa11.6.2024 11:00:00 CEST | Pressemelding
Owlet, Inc. («Owlet» or the «Company») (NYSE:OWLT), pioneren innen smart spedbarnsovervåking, kunngjør i dag den britiske og europeiske lanseringen av Dream Sock. Dette er en smart babymonitor med levende helseavlesninger og varsler for friske spedbarn mellom 0-18 måneder og 2,5-13,6 kg. Dette innovative medisinske utstyret gir foreldre helse og viktig informasjon i sanntid, noe som gir uovertruffen trygghet. Denne pressemeldingen inneholder multimedia. Se hele pressemeldingen her: https://www.businesswire.com/news/home/20240611820341/no/ (Photo: Business Wire) «Vi er svært stolte over å lansere Dream Sock til omsorgspersoner over hele Storbritannia og Europa og gi millioner av foreldre mer trygghet mens babyen sover,» sa Kurt Workman, Owlets administrerende direktør og medgründer. «Dream Sock er nå et globalt produkt som er anerkjent som medisinsk nøyaktig og trygt, etter å ha gjennomgått regulatoriske autorisasjoner og sertifiseringer innenfor flere geografier. I dag er misjonen vår
V-Nova Surpasses 1000 Patent Milestone in Media Technology Innovation11.6.2024 10:00:00 CEST | Press release
V-Nova, a leading provider of data compression solutions, video compression technology, XR technology, AI acceleration and parallel processing for a multitude of industries including media and entertainment, today announced its milestone achievement of 1000 active technology patents. This accomplishment underscores V-Nova’s dedication to research and development and its commitment to protecting its intellectual property globally. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240611724561/en/ V-Nova’s patent portfolio spans more than 50 different jurisdictions. Including over 400 patents in Europe, over 200 in the Americas, over 100 in the United States specifically, and over 200 in Asia. V-Nova forged new directions in data processing to enhance digital experiences, maximize efficiency, reduce costs, and increase sustainability. The company leads the way with key international data compression standards for the video indust
Alipay+ Reveals Top Scorer Trophy Design for UEFA EURO 2024™11.6.2024 09:24:00 CEST | Press release
Alipay+, a suite of cross-border mobile payment and digitalization technology solutions operated by Ant International and an Official Partner of UEFA EURO 2024™, today revealed the trophy that will be awarded to the most prolific marksman at the UEFA EURO 2024™ finale on July 14 in Berlin, Germany. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240610328619/en/ The UEFA Top Scorer Trophy presented by Alipay+ is unveiled for UEFA EURO 2024™ (Photo: Business Wire) Sculpted in the shape of the Chinese character “支” (pronounced zhi, and meaning payment as well as support), the trophy reflects Alipay+’s dedication to supporting consumers to enjoy seamless payment and a broad choice of deals using their preferred payment methods while traveling abroad. The character also resembles the fleeting moment of a barefooted striker poised to shoot, evoking the original beauty and power of football – a game that united people across the wo