Alcohol tax increases lower harm and health costs

Confidence: Speculative

Off by default

Shape: Delayed

Pricier alcohol reduces consumption and alcohol-related harm, which lowers health care spending after a few years.

Of every 100 euros that a change to “Alcohol excise” saves or brings in, 20 € is saved on top on the line “Health: hospital services”, starting after 1 yr and building up to its full size over 3 yrs. (The other way round if the change adds spending or cuts taxes.)

E(t) = s × T(t) × min(1, max(0, (n − delay + 1) / build-up))

Lower harm is well researched, but converting it to euros relative to the tax revenue is a rough assumption.

Sources: THL blog: Cheap alcohol would collapse alcohol tax revenue (revenue, traveller imports and the 2004 cut; in Finnish)

How the effect builds up over time

Share of the change's own effect on the balance, year by year while the change continues: −15% means 15% of a saving comes back as cost (or 15% of extra revenue is lost). With the default values.

You can switch the effect on or off and adjust its assumptions in the simulator under Cause-and-effect chains.