Curbing alcohol-associated liver disease by increasing alcohol excise taxes

Alcohol-associated liver disease (ALD) is caused by long-term heavy alcohol consumption. The disease is still a significant contributor to the morbidity burden of liver diseases in America and some European countries. A trend of increasing incidence of ALD has also been observed in Asia over the past two decades.1 Alcohol excise taxes are taxes imposed on alcoholic beverages and these taxes are typically included in the product price. Increasing the alcohol excise taxes is among the most efficient and cost-effective interventions for reducing excessive consumption of alcohol in the population. Increasing alcohol excise taxes indirectly increases the price of alcohol, which may exceed some consumers' intention or purchase ability, thereby reducing alcohol use and misuse. A study showed that doubling of spirits excise taxes would reduce per capita consumption of spirits by 8–10%, while the number of cases requiring liver transplantation for ALD would decrease by 6–7%.2 There is considerable heterogeneity in excise tax design across countries and beverage types. Therefore, we take spirits as an example to briefly describe the excise tax policies of different countries. Regional median excise taxes account for the highest share of the price for spirits (21.4%) in the Americas.3 In the European Union, the highest excise taxes are applied in Finland, Sweden, and Ireland, where the rates for a standard-size bottle of liquor are 16.08 dollars, 15.73 dollars, and 13.59 dollars, respectively. In China, the proportional tax rate for grain and potato liquor is 20%, and the fixed tax rate is 0.5 Yuan/500 g or 0.5 Yuan/500 mL. Determining the suitability of this policy in the local context and ensuring its effectiveness are key challenges encountered by policymakers. Herein, we discuss the factors that influence the effectiveness of increasing alcohol excise taxes in reducing the harmful use of alcohol. This article may help inform policymakers of the significance of taxation policy as a means to reduce the harmful use of alcohol, thereby reducing the enormous burden associated with ALD. World Health Organization (WHO) has identified three key factors that affect the effectiveness of taxation policy, i.e., tax pass-through, price elasticity of demand (PED), and unrecorded alcohol. Tax pass-through: Excise taxation works by increasing alcohol prices, and the degree to which the taxes translate into changes in consumer prices is often called pass-through. Therefore, the higher the degree of tax pass-through, the better the effect of the alcohol price increase. However, the degree of pass-through depends on several factors and circumstances. As increased taxes will raise the price of alcohol, the effectiveness mainly depends on alcohol retailers passing the tax increase on to the consumers.4 In the off-trade (e.g., liquor stores, supermarkets), price increases for the cheapest 15% of products fall below the duty increases (undershifting), while price increases for the products with above-median prices fall above duty increases (overshifting).5 This phenomenon was also observed in the on-trade (e.g., bars and restaurants). Undershifting is liable to weaken the effect of increasing taxes on alcohol consumption. A broadly similar point was recently made by Parikh et al6 who found that, when price may not be sensitive to increases in tax, tax-related policies may fail to improve ALD mortality. PED: PED, also known as price sensitivity, is an economic index that quantitatively measures the responsiveness of the quantity demanded to a change in price. The law of demand states that when the price of a commodity increases, the demand decreases. Therefore, the greater the PED, the more effective the pricing strategy. As a typical consumer product, the PED for alcoholic beverages may have a relatively inelastic demand (0 < PED < 1). Relatively inelastic demand is defined as the proportionate change produced in demand that is lesser than the proportionate change in the price of a product. PED for alcohol is heterogeneous and affected by several factors, including the type of alcoholic beverage as well as the gender, age, drinking pattern, and socioeconomic status (SES). These are also the risk factors for ALD. Thus, a more detailed account of PED based on different risk factors is provided below. Alcoholic beverage type: Globally, the main types of alcoholic beverages are spirits and beer, which are also associated with a high risk of ALD. Wagenaar et al7 analyzed data from 112 studies (primarily conducted in high-income countries) and reported a mean PED of 0.46 for beer and 0.80 for spirits. Interestingly, Sornpaisarn et al8 analyzed 10 studies conducted in low- and middle-income countries and observed similar estimates of 0.50 for beer and 0.79 for other alcohols (including spirits). These results suggest that higher prices are likely to reduce the demand for liquor and beer, especially spirits, in all countries, irrespective of income level. However, the impact of alcohol prices and/or taxation on alcohol consumption has not been investigated in some countries or regions (especially in low- and middle-income areas). Therefore, the generalizability of the above results needs to be confirmed. Gender: In most countries or regions, men consistently drink more than three times as much as women, so the ALD population is predominantly male. Gender differences in drinking preferences may lead to much less price sensitivity for men than women. Overall, adult men have fewer elastic demands compared with women. However, there are significant differences in gender responsiveness to price changes in different countries or regions. For example, PED was only 0.03 for men and virtually zero for women in China. However, in Italy, the reported short-run elasticity for men was 0.37–0.56, and for women was 0.57–1.24. Therefore, the alcohol taxation policies should be cognizant of the local context. Age: ALD incidence peaks in middle age, but it takes at least 10 years for long-term heavy drinking to progress to ALD; therefore, adolescents and young adults who consume alcohol are potentially high-risk groups. Additionally, studies have demonstrated an association between early drinking and AUD in adulthood. However, a meta-analysis of 132 studies, mainly from Western countries, showed that adolescents (age <18 years) were almost insensitive to price changes in alcoholic beverages. Therefore, covering this part of the population seems challenging through a price-raising policy alone. Drinking patterns: There are various types of drinking patterns, including daily alcohol consumption, drinking frequency, and drinking with meals. Special attention needs to be paid to people with high-risk drinking patterns because they may be at higher risk of ALD. Studies have shown that compared to moderate drinkers, heavy drinkers and alcoholics are somewhat less price-sensitive for alcohol addiction and show a preference for low-price alcoholic beverages. Therefore, it is difficult to reduce their alcohol consumption by pricing strategies. SES: SES refers to a composite measure of a person's economic and social position in relation to others, based on income, education, and occupation. There is a famous paradox of alcohol harm, that is, lower SES leads to a 1.5–2-fold higher mortality from alcohol-attributable causes compared with all causes. Studies have demonstrated that low-income drinkers have a stronger responsiveness than high-income drinkers. Therefore, tax increases may be more suitable for countries or regions with an underdeveloped economy but a high burden of ALD, such as Asia.1 Unrecorded alcohol: Unrecorded alcohol is defined as alcohol that is consumed but is not registered in official statistics for sales, production, or trade. An estimated 25% of worldwide alcohol consumption is unrecorded. Unrecorded alcohol can undermine the impact of cost-effective alcohol control interventions. As there is no tax on unrecorded alcohol, there is an unfair price advantage compared to recorded alcohol. This pricing disparity may be exacerbated by increasing alcohol excise taxes, driving consumers, particularly low-income drinkers, to switch to unrecorded alcohol and contributing to higher rates of chronic and irregular heavy drinking. The epidemiology of unrecorded alcohol consumption varies in different countries/regions. For example, industrially manufactured spirits were found to be most common in India. Cross-border shopping was reported as the most prevalent method of obtaining unrecorded alcohol in parts of Europe. Therefore, regional initiatives tailored to local socioeconomic realities are frequently required to regulate the availability and price of alcohol in order to reduce the harm caused by unrecorded alcohol consumption. Improving ALD management policies: There are downsides to increasing alcohol excise taxes, such as imposing a heavier financial burden on individuals with low incomes and interfering with the operations of bars. Therefore, increasing alcohol excise taxes as a measure to reduce alcohol consumption may not be universally appropriate for all countries. Assuming undershifting of low-price alcoholic beverages, a low PED (from the perspective of targeting high-risk groups for ALD, increasing alcohol excise taxes are typically less effective for adolescents, young adults, and heavy drinkers) and high levels of unrecorded alcohol consumption, using tax policies to address excessive drinking and alleviate the burden of ALD would be ineffective. It may even lead to and aggravate adverse outcomes. However, determining the optimal level of taxation that maximizes policy advantages poses significant challenges; it should be based on more than just minimum alcohol consumption but evaluated in conjunction with other indicators, including tax burdens and economic conditions. Further research is needed in this area. To summarize, the establishment of other public health policies is imperative. Studies have demonstrated that more restrictive alcohol-related policy environments are associated with lower overall ALD mortality, including liver cancer.6,9 Minimum unit pricing (MUP) introduces a minimum price below which a unit of pure alcohol cannot be sold to consumers. MUP can not only maintain the effectiveness of alcohol tax policy but also weaken the impact of undershifting. A recent study showed that MUP in Scotland was associated with a 13.4% and 4.1% reduction in deaths and hospitalizations wholly attributable to alcohol consumption. The effects were driven by significant improvements in chronic outcomes dominated by ALD.10 Adolescent drinking is a complex problem and is hard to solve by any single policy. Therefore, Iceland has implemented a combination of alcohol control policies, such as family commitments and increased after-school activities, which helped reduce alcohol use among younger individuals from 42% to 5% in 20 years. Abstinence is the ultimate treatment for ALD and reduced alcohol consumption can lead to rapid improvements in individuals with established cirrhosis. Avanceña et al's11 study demonstrated that medication-assisted therapy and clinician counseling for patients in the compensatory stage of alcoholic cirrhosis were extremely cost-effective strategies for reaching abstinence and even delaying the occurrence of decompensated events. In conclusion, increasing alcohol excise taxes as a policy intervention against ALD should be preceded by an analysis of the local context and the key factors affecting the policy effectiveness, including tax pass-through, PED, and unrecorded alcohol. Additionally, synergistic use of a number of public measures is more conducive to ALD management. Public health policymakers should attach greater importance to the development of an effective, population-based blueprint for action to reduce the burden of ALD. Acknowledgments We thank Medjaden Inc. for the scientific editing of this manuscript. Funding This work was sponsored by the National Natural Science Foundation of China (Nos. 81972265 and 82170602), the National Natural Science Foundation of Jilin Province (No. 20200201324JC), the Project for Middle-aged and Young Excellent Technological Innovation Talents of Jilin Province (No. 20220508079RC), and the Project for Health Talents of Jilin Province (No. JLSWSRCZX 2021-079). Conflicts of interest None.