Wednesday, 16 May 2012

Sin taxes

The National Business Review notes that
Finance Minister Bill English may hike the excise on tobacco and alcohol, and further tighten rules on property investment, to help bridge the $640 million shortfall in his pledge to return to budget surplus in 2015.
"I think we will see some sin taxes rise - alcohol and cigarettes - these sorts of things," said Cameron Bagrie, chief economist at ANZ National.
But we, and the government, should also take note of this point made in The Wages of Sin Taxes by Christopher Snowdon,
Taxing goods which are price inelastic, especially those which are addictive, is far more likely to impoverish consumers than it is to turn them into abstainers. Alcoholics are rarely deterred from drinking by higher prices and there is evidence that tobacco taxes are now so high that further increases will yield diminishing returns. Many studies have concluded that ‘fat taxes’ and ‘soda taxes’ have little or no effect on rates of obesity. Such levies are better seen as stealth taxes than sin taxes.
Sin taxes may be great for generating revenue, but unless huge they achieve little else worthwhile.


Junior Freeman said...

Finance Minister Bill English should make a significant move in order to get back to the surplus budget he's promising the public about. It's going to be a difficult task for him alone.

Anonymous said...

The eye searing hypocrisy of sin taxes. They tax cigs and alcohol ostensibly in an attempt to modify behavior, then why the hell are they taxing good things like earning a living, building a house, selling food or a billion other voluntary exchanges where both parties end up better off. A tax is a fine for doing good, a fine is a tax for doing bad. They've got it covered.