Business Wire

New International Tax and Investment Center Research Reveals Link between Tax and Illicit Alcohol Market Size

Share

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.”
  5. 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.

Contact information

Diana McKelvey
dmckelvey@iticnet.org
1 (202) 530-9799

About Business Wire

Business Wire
Business Wire
24 Martin Lane
EC4R 0DR London

+44 20 7626 1982http://www.businesswire.co.uk

(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

Dentalis Animal Health appoints Advisory Board4.2.2023 15:09:00 CET | Press release

Dentalis Animal Health, a company specializing in Oral Health care for companion animals, has announced the appointment of its Advisory Board. Michael Kelly Michael Kelly is an Animal Health Pharmaceutical Industry veteran with broad international business experience. A graduate of Harvard Business School and Cornell University, Michael was hired by Ciba-Geigy to begin his post graduate career in Switzerland. Eventually ending up in the Novartis Animal Health US Division (following the Ciba-Sandoz merger) he rose to CFO and VP of North America. In 2009 Kelly joined Piedmont Animal Health (PAH), a drug development company, and served various roles including CFO, COO and President. During his tenure at PAH the organization received more FDA Companion Animal Drug approvals than any other Company in the Industry. Dr Stephanie Livermore Dr. Stephanie Livermore has been practicing companion animal medicine and surgery since her graduation from the University of Guelph in 2008. Dr. Livermore

Autel Brings MaxiCharger DC Compact to eCarExpo and Signs Partnership Agreement with Leading Charging Operator Eways4.2.2023 09:00:00 CET | Press release

Autel, a leading provider of automotive electronics and diagnostic equipment and tools, exhibited for the first time at eCarExpo, the largest electric vehicles fair in the Nordic countries, on February 3-5, 2023, in Friends Arena, Stockholm. Autel brought its portfolio of products featuring the recently launched electric vehicle charger the MaxiCharger DC Compact. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230204005001/en/ Autel signs partnership agreement with leading charging operator Eways (Photo: Business Wire) As Autel's newly launched DC charger for EVs, the MaxiCharger DC Compact is not only sleek and compact with a 21.5-inch LCD touchscreen, but also powerful enough to provide up to 47kW of power for the European version. Either placed on a pedestal, or set on wheels for ultimate portability, the MaxiCharger DC Compact is perfect for charging operators wanting to provide their customers with a quick charge option

U.S. FDA Approves Takeda’s TAKHZYRO ® (lanadelumab-flyo) to Prevent Hereditary Angioedema (HAE) Attacks in Children 2 Years of Age and Older4.2.2023 00:48:00 CET | Press release

Takeda (TSE:4502/NYSE:TAK) today announced that the U.S. Food and Drug Administration (FDA) has approved the supplemental Biologics License Application (sBLA) for the expanded use of TAKHZYRO® (lanadelumab-flyo) for prophylaxis to prevent attacks of hereditary angioedema (HAE) in pediatric patients 2 to <12 years of age.1 Prior to today’s approval, the only approved routine prophylaxis treatment options for children 6 to <12 years of age required dosing every three to four days,and children with HAE 2 to <6 years of age had no approved prophylaxis treatment, making TAKHZYRO the first prophylaxis treatment for this age group.1-5 The recommended dose is 150 mg/1 mL solution in a single-dose prefilled syringe every four weeks in patients 2 to <6 years of age and every two weeks in patients 6 to <12 years of age.1 HAE attacks can involve serious and debilitating swelling in the abdomen, face, feet, genitals, hands and throat.5,7 Potentially fatal upper airway angioedema has been reported i

SLB Completes Acquisition of Gyrodata Incorporated3.2.2023 22:05:00 CET | Press release

SLB (NYSE: SLB) today announced it has completed the acquisition of Gyrodata Incorporated, a global company specializing in gyroscopic wellbore positioning and survey technology. The transaction will incorporate Gyrodata’s wellbore placement and surveying technologies within SLB’s Well Construction business, bringing customers innovative drilling solutions. This combination will improve wellbore quality and reduce drilling risk to unlock even the most remote and complex reservoirs. Integrating three-axis solid state gyro measurements with the latest SLB technological innovations will help ensure tighter trajectory control, reduce data acquisition time and improve the decision-making process—resulting in greater overall drilling efficiency. “I’m excited for this historic moment that will bring innovative solutions to the SLB Well Construction division and our industry,” said Jesus Lamas, president, Well Construction, SLB. “The technology-driven acquisition of Gyrodata is aligned with SL

Gallagher Re Joins ABIR and EY as 2023 Bermuda Risk Summit Headline Sponsors3.2.2023 16:17:00 CET | Press release

The Bermuda Business Development Agency (BDA) is pleased to announce that Gallagher Re has joined the Association of Bermuda Insurers and Reinsurers (ABIR) and EY as headline sponsors of the second annual Bermuda Risk Summit. Adam Schwebach, Executive Vice President, Gallagher Re, said, “Gallagher Re is proud to support the second Bermuda Risk Summit, an annual event that showcases the breadth and versatility of Bermuda’s globally significant risk market. This event serves as a timely opportunity to connect with industry leaders ahead of midyear renewals and we applaud the BDA for their efforts in making the Bermuda Risk Summit a success.” David Hart, BDA CEO, said, “We are just so excited to welcome Gallagher Re as our third and final headline sponsor, along with ABIR and EY. The theme of the 2023 Bermuda Risk Summit, being held from March 6-8, 2023, at the Hamilton Princess & Beach Club is ‘Innovation, Sustainability and Collaboration. We anticipate an even stronger attendance level