Vice Squad
Monday, February 19, 2007
Sobering Results of the Finnish Alcohol Tax Cut

The EU decided that individuals could carry as much alcohol as they wanted across internal borders, as long as the alcohol was intended for their personal use. When this regulation became binding upon Finland at the beginning of 2004, it provided a relatively easy channel for Finns to legally avoid their very high domestic alcohol taxes while continuing to drink. The high-tax regime was slated to be put under further pressure in May, 2004, when Estonia, easily accessible from Helsinki and with very low cost alcohol, would join the EU. So Finnish authorities took a pre-emptive move, lowering their own alcohol taxes on March 1, 2004.

Alcohol sales from the Finnish state retail monopoly subsequently went up, though not enough to compensate (in terms of tax revenue) for the lowered rates. But did cheaper alcohol lead to any problems in Finland?

It looks now as if the answer is yes. The March issue of Addiction contains a study by Anna Koski et al. that finds that:
...the alcohol tax cuts had a significant and abrupt impact on the number of alcohol-positive deaths. The estimated effect was approximately eight additional alcohol-positive deaths per week starting from March 2004, which is a 17% increase compared with the weekly average of 2003. This result is completely in line with the fact that there was a sharp increase in the domestic alcohol sales after this date, suggesting that the increase in alcohol consumption has led to more sudden deaths. Removing restrictions on traveller's allowances had no effect, nor did Estonia joining the EU, although it has to be noted that the three measures occurred relatively closely in time, and therefore it is possible that the impact of the tax cuts might tend to obscure other changes.
Furthermore, there was an 11 percent increase between 2003 and 2004 in the number of drunks arrested. Wow.

One year after the tax decrease, Vice Squad noted that alcohol consumption had increased in Finland.

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