The taxing issue of alcohol abuse
Establishing an alcohol injury fund
Dr Sebastian van As
Alcohol abuse is estimated to cost South Africa in excess of R9 billion per
year. Excise duties on alcoholic beverages will collect approximately R4.2
billion in 2003/4. So why don't we, as a matter of urgency, increase excise
taxes on alcohol and set up an alcohol injury fund, plus expand prevention
programmes?
The social costs of alcohol-related trauma and accidents in South Africa far
exceed those of most other countries. Intoxication is a major factor behind a
high percentage of motor vehicle-related injuries and incidents of interpersonal
violence.
A multi-centre study in South Africa shows that over half of all trauma unit
patients are victims of violent injuries and between 36% and 79% of patients
tested positive for alcohol. Fifty two percent of patients dying in
transport-related incidents had an elevated blood alcohol content, according to
the third annual report of the National Injury Mortality Surveillance System1.
The majority of these cases (91%) had alcohol levels greater than the legal
limit of 0.05g/100ml. Pedestrians and drivers had the greatest percentage with
positive blood alcohol levels.
Of all homicides 53% were alcohol-related and of these, 89% had blood alcohol
levels of more than 0.05g/100ml.
Forty three percent of all firearm-related deaths were alcohol-related, while
77% of people who died due to sharp objects had positive alcohol levels,
compared to 54% for assaults with a blunt instrument, 26% for strangulation and
45% for burns. A strong correlation between intimate partner abuse and alcohol
abuse by the male partner has recently been reported.
Robust response required
Clearly the existing government programmes and interventions are insufficient
and a much more robust and comprehensive programme is urgently required.
Effective interventions include dealing with under-age access to alcohol, and
decreasing access through a coherent liquor outlet policy, including bringing
shebeens into a regulated framework. Greater use should be made of random breath
testing of drivers.
A graduated driver licensing policy should be considered, including much
lower allowable alcohol levels within the first three years of obtaining a
licence. Attention should be given to screening and motivational interviewing at
primary healthcare centres, and enforcing existing legislation, for example,
around public drunkenness and the dop system. Counter-advertising should be
used.
Balancing pricing and consumption
The price of alcohol has been shown internationally to be an important
determinant of consumption - and excise taxes are a key factor in price. Setting
the levels of excise taxes requires great wisdom given the large potential
trade-offs. The beer and wine value chains contribute over R35 billion in
turnover and employ over 660 000 people.
Increasing excise taxes on alcohol will correct for externalities associated
with alcohol consumption, which are not currently being paid for by alcohol
consumers and also raise revenue for programmes to reduce the social burden
associated with alcohol abuse. The National Treasury has recently undertaken a
comprehensive review of taxation of alcoholic beverages. Based on this the level
of tax (excise plus VAT) has been increased for beer from 30.7% in 2001 to 33%,
for wine from 20.2% to 23%, and for spirits from 38.6% to 43% of the retail
price. These increases are to be welcomed. However we question whether they go
far enough.
The review quotes Stiglitz2, Rosen3, and Walsh4 who argue that such taxes should
present individuals and firms with the true social costs of their actions.
Marginal social costs should equate to marginal benefits in order to adequately
control negative externalities and bring the value of an additional unit of
consumption in line with its social costs. Levels of excise taxes are
approaching international levels but not in all cases. In the case of spirits,
for example, they are still significantly lower (43% versus 51%-58%).
Our main concern, however, is that the level of social costs in South Africa
far exceeds that of most other countries. This suggests that our excise taxes
need to be higher to achieve the correct balance between benefits and costs. We
recognise that smuggling of alcohol and consumption of unhygienic concoctions
may occur if prices are increased too much.
Parry et al.5 have made the case for increasing excise taxes on beer to near
the international average, instituting a moderate increase in the excise taxes
on wine and spirits (by 2-3%), and pegging the tax on sorghum beer and sorghum
powder to 50% that of malt beer. They also support the National Treasury's
policy of pegging the excise tax on alcoholic fruit beverages and ciders to that
of malt beer, and spirit coolers to the same level as that of spirits.
More prevention programmes called for
Expenditure on a range of intervention programmes needs to increase. Primary
prevention activities, drug and alcohol treatment and rehabilitation units and
interventions are in many cases non-existent or operating at far below required
levels. Trauma units filled with pathologies associated with alcohol have
insufficient equipment and resources.
Should funding from excise taxes be more specifically linked to specified
expenditures? Parry et al4. argue for increased excise taxes to be specifically
allocated for the prevention and treatment of problems caused by the misuse of
alcohol, including alcohol counter-advertisements, funding alternatives to
liquor industry-funded sports sponsorships, community-based prevention
programmes targeting high risk groups (e.g. motor vehicle drivers and
pedestrians), and treatment programmes for young people. They indicate that
increased funding for alcohol intervention could occur directly via an earmarked
tax, or indirectly following applications by provincial departments of Health
and Social Services).
Establishing and alcohol injury fund
The establishment of an alcohol injury fund (along the lines of the Road
Accident Fund) to specifically compensate victims of trauma by paying for health
costs and other damages suffered could reduce the ill effects of alcohol.
Victims of alcohol-related crimes are frequently poor and have little recourse
to legal action or compensation.
A prerequisite for claiming from this fund would be the proof that the
perpetrator was under the influence of alcohol while inflicting the injury. This
could be performed by a breathalyzer test, followed by a blood test for alcohol
(performed by a district surgeon on instruction of the police). This will
encourage alcohol testing and create a climate of more awareness, which in
itself might lead to fewer alcohol-related injuries.
Amalgamating these two proposals would results in an expansion of the idea of
an alcohol injury fund for victims of alcohol-related trauma to provide a
broader base of funding of victims, as well as for needed equipment for
beleagured trauma units, funding for substance abuse treatment centres
(particularly for young persons and residents of previously disadvantaged areas
where there is a lack of services), and for primary prevention at a community
level aimed at reducing the burden to society associated with alcohol-related
injuries.
The essence of the alcohol injury fund
This would also accord with the point made in the Draft National Liquor
Policy that we should move towards a "polluter pays" policy. The
Alcohol Injury Fund combines the internationally proven most effective
anti-alcohol strategies of random-breath testing and liquor tax increase. It is
also an incentive for people to bring perpetrators of alcohol crimes to book by
encouraging breath testing.
The time for stronger government action on alcohol is now.
More information:
Dr Sebastian van As is the Head of the Trauma Unit at Red Cross Children's
Memorial Hospital, and Director of the Child Accident Prevention Foundation of
Southern Africa.
Further reading:
1. Matzopoulos R, Bowman B, Donson H, Harris C, Prinsloo M, Sukhai A, van
Niekerk A, Wyngaard G. A profile of fatal injuries in South Africa: Third Annual
Report of the National Injury Mortality Surveillance System. Parow: MRC, 2002.
2. Stiglitz JE. Economics of the public sector. Norton and company; New York:
1988.
3. Rosen HS. Public finance. Irwin; Illinois 1985.
4.Walsh BM. The economics of alcohol taxation. Gardner Press.
5. Myers B, Parry CDH. Report on Audit of Substance Abuse Facilities in Cape
Town (2002). Parow: Medical Research Council, 2003
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