
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
11 Winners Recognised at Zayed Sustainability Prize Awards Ceremony held during COP28 UAE2.12.2023 03:15:00 CET | Press release
His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the UAE, today awarded the winners of the Zayed Sustainability Prize, the UAE’s pioneering global award in sustainability and humanitarianism, during a ceremony held at COP28 UAE in Expo City Dubai. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20231201649250/en/ 11 winners of the Zayed Sustainability Prize Recognised at COP28 (Photo: AETOSWire) The Ceremony was attended by numerous heads of delegations participating in COP28, ministers, senior government officials, and Prize winners and finalists. His Highness congratulated the winners, praising their efforts in promoting sustainability and encouraging them to continue their important contributions in this field. His Highness emphasised that the UAE is steadfast in building upon its established legacy in sustainability, a foundation laid by the country’s Founding Father, the late Sheikh Zayed bin Sultan Al Nahyan.
Zextras Introduces Carbonio - A Private Digital Workplace1.12.2023 16:07:00 CET | Press release
Zextras, the leading email and collaboration solutions provider, introduced Carbonio - a private digital workplace for the public sector and regulated industries. Carbonio emerges as an exceptional solution for the public sector, enabling them to implement an extensive digital workspace for their internal teams and stakeholders. Delivering a suite of features that are not only comprehensive but also fully customizable, from emails and calendars to video meetings and file storage, Carbonio allows for superior adaptation to any unique technical requirements or business objectives. It is equally enticing for regulated industries to enhance their operations by providing secure software solutions tailored to meet the distinct security needs of their country and respective states. The platform is rooted in robust compliance with global data protection regulations, including the European General Data Protection Regulation (GDPR). This fosters a secure digital environment for users, ensuring t
Beyond Medtech: Healthcare + Expo Taiwan Sets New Stage for Global Innovation in Future AI Healthcare1.12.2023 16:00:00 CET | Press release
The Healthcare+ Expo Taiwan, currently taking place at Nangang Exhibition Hall 1 from November 30 to December 3, 2023, is poised to redefine the landscape of AI healthcare on a global scale. This year's edition boasts the remarkable participation of 650 companies, occupying 2,300 booths, and has garnered the attention of leading technology firms and hospitals across the Asia-Pacific region. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20231201062013/en/ Expand businesses into growing markets in the APAC region with Healthcare+ Expo Taiwan. Join medical institutes and companies in the fields of medtech, biotech and healthcare to promote products, build partnerships and seize supply-demand opportunities. (Graphic: RBMP & IBMI) Taiwan's pivotal role in the AI-related supply chain is underscored by its impressive contribution, manufacturing AI chips, and over 90% of the world's AI servers. This proficiency positions Taiwan as a
International Sustainable Forestry Coalition Welcomes New Member, Sumitomo Forestry1.12.2023 15:31:00 CET | Press release
In September 2023, an international group of leading sustainable forestry companies launched the International Sustainable Forestry Coalition (ISFC) to support an increased contribution of the forestry sector to the transition to a sustainable society. Today the ISFC is delighted to announce that Sumitomo Forestry has joined the coalition. Sumitomo Forestry, headquartered in Tokyo, Japan, is a globally respected forestry sector leader with a long and honourable history. The Company’s history dates back to the seventeenth century when the Sumitomo family opened a copper mine in the Southern part of Japan and sourced timber for fuel and construction as well. Now, the company operates across the forestry value chain from forestry management, to wood processing, trading, wooden construction and biomass power generation. The firm is pursuing a long-term vision for the role of the forestry sector in the decarbonized society. Sumitomo Forestry manages sustainable working forests in Japan, Ind
Ant Group unveils "Fight Plastic for Nature" Action Initiative at COP281.12.2023 14:09:00 CET | Press release
In a pivotal move to address plastic pollution and promote nature conservation, the Ant Forest Foundation, established by Ant Group and its affiliates, today announced the launch of the "Fight Plastic for Nature" Action Initiative. The initiative was announced during the 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change in Dubai, United Arab Emirates at the IUCN Pavilion. The International Union for Conservation of Nature (IUCN) will provide tools and standards to measure the reduction in plastic pollution and its positive impact on biodiversity. Additionally, the IUCN will share and promote best practices in plastic emission reduction across the plastic life cycle. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20231201206207/en/ During COP28, Ant Group unveiled Fight Plastic for Nature Action Initiative with partners at IUCN Pavilion on Dec.1, 2023 in Dubai, UAE (Photo: Busin