Bringing It All Back Home: Alcohol Taxation and Cross‐Border Shopping

Crawford, Ian; Tanner, Sarah

doi:10.1111/j.1475-5890.1995.tb00223.x

Cited by 27 publications

(26 citation statements)

References 5 publications

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“…We examine how much of the variation in UPCstore level pass-through rates is explained by class-or UPC-dummy variables and find that much of the variation in pass-through rates occurs at the class-level. 11 Between-class variation accounts for approximately 44 percent of the variation in pass-through rates. Within-class but between-UPC variation accounts for an additional 8 percent of the variation in pass-through rates.…”

Section: Tax Incidencementioning

confidence: 99%

Consumer Response to Cigarette Excise Tax Changes

Chiou¹,

Muehlegger²

2014

National Tax Journal

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We use a rich dataset of weekly cigarette sales to examine how consumers adapt their behavior before and after excise tax increases -whether by reducing demand, stockpiling, traveling to low-tax jurisdictions, or substituting towards lower-cost brands. Consumer response varies substantially for different types of cigarettes. Stockpiling primarily occurs for discount cigarettes and is most pronounced at stores far from lower-tax jurisdictions. Border-crossing is greatest at stores close to low-tax jurisdictions and occurs primarily for cigarettes sold by the carton. Finally, we find modest short-run substitution towards lower-cost brands following a tax-increase, consistent with consumers smoothing the transition to higher cigarette taxes. These differences in consumer behavior lead to meaningful differences in tax incidence -pass-through is higher for discount cigarettes which have more inelastic demand. Pass-through is lower near low-tax borders, especially for cigarettes sold by the carton for which cross-border evasion is greatest.

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Section: Tax Incidencementioning

confidence: 99%

Consumer Response to Cigarette Excise Tax Changes

Chiou¹,

Muehlegger²

2014

National Tax Journal

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“…Similarly, if the actual elasticity is (absolutely) larger than this critical level, then the actual tax rate is above its revenue-maximising level and revenue can be increased by cutting taxes. Comparing the critical elasticity levels for beer, wine and spirits with estimates of the own-price elasticities, Crawford and Tanner (1995) concluded that the rates of tax on beer and wine were below their revenue-maximising levels and that further increases in the rates of tax would cause tax revenues to rise. In the case of spirits, however, it could not be rejected that the current rate of tax was revenue-maximising.…”

Section: Tax Rates and Revenuesmentioning

confidence: 99%

“…Crawford and Tanner (1995) show a special case of this more general approach where all the crossprice effects are zero. Denote the tax rate on good i by τ i , total tax revenue from all goods by R, the quantity demanded by q i and the tax-exclusive price by π i ; then the total indirect tax revenue function with n goods is given by…”

Section: Tax Rates and Revenuesmentioning

confidence: 99%

“…9 Crawford and Tanner (1995) discussed the relationship between the tax-inclusive and taxexclusive prices and the own-price elasticity of demand at the point of revenue maximisation (assuming zero cross-price effects). Given the current tax-inclusive and tax-exclusive prices, there is a critical elasticity level that implies that the current tax rate is revenue-maximising.…”

Section: Tax Rates and Revenuesmentioning

confidence: 99%

“…Given tax rates and spending, the overall effect on indirect tax revenue depends on the price sensitivity of demand for alcohol. Empirical estimates by Crawford and Tanner (1995) of the own-price elasticities of demand for beer, wine and spirits one year after the introduction of the Single Market have shown that cutting duties on beer and wine would lead to a loss of indirect tax revenue. In the case of spirits, however, the authors could not statistically reject the hypothesis that a cut in duties would lead to an increase in total indirect tax revenue.…”

Section: Introductionmentioning

confidence: 99%

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Alcohol taxes, tax revenues and the Single European Market

1999

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This paper addresses the issue of whether tax revenue from alcohol lost through cross-border shopping could be recouped by cutting excise duties. This in turn depends on the elasticity of demand for alcohol.We use data from the Family Expenditure Survey 1978-96 to estimate own-and cross-price elasticities of demand for beer, wine and spirits before and after completion of the Single Market. We find no evidence of a significant change in elasticities after the Single Market. The tax rates on beer and wine are currently below their revenue-maximising rates, implying that a cut in the duty rate on beer or wine would lead to a decrease in indirect tax revenue from alcohol. We cannot reject that the current tax rate on spirits is at the revenue-maximising rate, implying that further increases in the duty on spirits are likely to cause indirect tax revenue to fall.JEL classification: H21.

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