EDITORIAL: Alcohol taxation should be increased urgently

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There is one "unresolved" issue on which the parties and political leaders appear to be in complete agreement: taxation on alcohol should be tightened up, and as soon as possible.
      Martti Häikiö's history of the retail liquor monopoly Alko makes for recommended summer reading for those Finnish decision-makers gearing up for the budget negotiations, and why not for others, too. The lesson of the book is that there are but two means of controlling Finnish alcohol consumption - adjusting the price or the ease of access to a drink.
     
It is a very simple equation, and one that can be learned by heart before the budget talks get under way: price goes down, consumption goes up; price goes up, consumption goes down; availability restricted, consumption declines; ease of access improved, consumption heads upwards again.
      The Alko history demonstrates that these elementary mathematical formulae have stood the test of time from one decade to the next.
     
There have nevertheless been other experiments. In 1969 medium-strength beers were released from the Alko clutches for sale in supermarkets, and access was thus markedly improved - age-limits on who could buy liquor were lowered, Alko opening hours were extended, and new outlets were opened.
      The noble intention with such measures was to "Europeanise" and fashion Finnish consumption habits: to nudge people away from the hard stuff and towards wines and milder drinks. At the same time a lot of effort went into alcohol enlightenment campaigns.
     
The end result was - in Häikiö's words - "the biggest disaster of Finnish postwar social history".
      Consumption soared and exceeded all the projections.
      The Finns did not transfer their affections from spirits to fine wines but decided instead to have both of them. Aggregate consumption grew by 240 per cent in the space of seven hectic years*.
     
A second lesson of the volume is that alcohol policy has been governed in great measure by the state of the national economy.
      Alko was founded in 1932 when the state coffers were practically empty.
      Again, in 1969, there would have been a natural handbrake to apply to the colossal increase witnessed in consumption: price hikes. They were not implemented, however, because of fears at the time that this would have triggered galloping inflation.
      This same prioritizing of economic considerations reared up in 2004, when Estonia joined the European Union. It was perfectly well known, and well in advance, that the price of alcohol sold here would have to be adjusted to the sort of levels that would safeguard against the nation being flooded with tourist imports from across the Gulf of Finland.
     
The wisest course of action would have been to begin positioning the prices in good time before D-Day on May 1st, but this did not happen, because at the end of the 1990s the state urgently required the lucrative income it derived from alcohol taxation.
      As a consequence Finland implemented one huge juddering price cut, at the last minute and without any acclimatising, in the spring of 2004.
      For the active drinker the situation was akin to a shopper walking into the summer sales in a clothing outlet: "Special! 22% off all items today!"
      We could not pretend to be surprised at what took place: alcohol consumption spurted upwards and the detrimental effects grew noticeably. They were noticed in hospitals, by childcare professionals and social workers, in traffic, and in the workplace. The bill for all this - both in economic terms and in human suffering - is growing all the time.
     
The reaction of the government of Matti Vanhanen was initially to wait and see what happened to the drinking classes.
      The next step was to order the addition of warning labels on bottles, to ban the use of loss-leader bulk discounts on beers in supermarkets, and to introduce new restrictions on advertising.
      If these steps were not associated with such a sad development in the common health of the nation, they would be described as laughable. Häikiö points out pertinently that it is hard to find any scientific evidence that enlightenment can be used to stem alcohol consumption.
     
The government now has to recognise and accept two things. In the first place it must be acknowledged that the sudden slashing of prices in 2004 was a mistake. Secondly this band-aid approach with sticky labels and limits on advertising is patently not going to correct the error. Which leaves only the weapon of price.
      It is hard to believe today that a rise in retail prices would any longer send the Finns off in droves to Tallinn to stock their drinks cabinets.
      The European Court of Justice has also issued some rulings that slightly caulk up the leaking borders: the Nordic retail monopoly has in practice been given official blessing, restrictions have been put on online sales of liquor, and personal alcohol imports have to be brought into the country by the individual himself.
     
Helsingin Sanomat / First published in print 28.7.2007
     
*Translator's Note: Aggregate consumption in 1968 was less than 3 litres of pure alcohol per person. By 1975 it had topped 6 litres/person. The current figure, including "undocumented" consumption (imports and duty-frees for the most part) is just over 10 litres/inhabitant. The aggregate figure declined slightly from 2005, as a result of a sharp fall in the "undocumented" column, as fewer people brought large quantities of alcohol in from Estonia and elsewhere. Registered sales, by contrast, rose by some 2% from the previous year.


Previously in HS International Edition:
  Alcohol and tobacco tax to rise in Estonia next year(25.5.2007)
  It was the customers that toppled Alko (review of Häikiö book, 11.4.2007)
  Parliamentary parties ready for alcohol tax hike (14.2.2007)
  Warning labels coming on containers of alcoholic beverages (7.2.2007)

Helsingin Sanomat