The Impact of Excise Duty Changes on Retail Prices in the UK

Baker, Paul; Brechling, Vanessa

doi:10.1111/j.1475-5890.1992.tb00173.x

Cited by 25 publications

(17 citation statements)

References 6 publications

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“…It is difficult to compare our results with previous analyses which have not estimated pass-through across the price distribution. However, the magnitude of our calculated pass-through values are comparable to those of Baker & Bechling [8], in which beer and wine were found to be overshifted and spirits undershifted. Similarly, our results capture specific products pass-through estimates presented by Hunt et al [7].…”

Section: Discussionsupporting

confidence: 82%

“…The average rate at which tax is passed through to consumers within each beverage category varied; with full shifting or over-shifting in the on-trade and substantial under-shifting by large off-trade retailers. Similarly, in 1992, Baker and Brechling [8] employed time series averaged quarterly data to investigate the impact on alcohol (beers, wines and spirits), tobacco and petrol prices of changes in excise duties. The authors conclude that while wines are over-shifted on average, a hypothesis of full pass-through for beers, spirits and petrol could not be rejected.…”

Section: Introductionmentioning

confidence: 99%

“…Two UK studies investigate tax pass-through of alcoholic products adopting a time series mean regressionbased approach using aggregated price data for specific product categories (e.g. average price of a pint of beer) as a dependent variable and changes in excise duty as a covariate [7,8]. In 2011, Hunt et al [7] related changes in prices to changes in excise duty for both onand off-trade products.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

et al. 2014

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Aims: Effective use of alcohol duty to reduce consumption and harm partly depends on retailers passing duty increases on to consumers via price increases; also known as 'passthrough'. The aim of this analysis is to provide evidence of UK excise duty and sales tax (VAT) pass-through rates for alcohol products, at different price points. Setting: March 2008 to August 2011, UKDesign and measurement: Panel data quantile regression estimating the effects of three duty changes, two VAT changes and one combined duty and VAT change on UK alcohol prices, using product-level supermarket price data for 254 alcohol products available weekly.Products were analysed in four categories: beers, ciders/ready to drink (RTDs), spirits and wines. shifting affects approximately 57% of total beer sales and 30% of total spirits sales. Conclusions:Our results show lower pass-through of duty increases for cheaper products (lowest 15 percentiles) and over-shifting for expensive products (prices above the median). This is likely to impact negatively on tax policy effectiveness. High risk groups, including heavy drinkers and particularly low income heavy drinkers, favour cheaper alcohol and under-shifting is likely to produce smaller consumption reductions among these groups.

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Section: Discussionsupporting

confidence: 82%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

et al. 2014

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“…4 Baker and Brechling (1992) look at the effect of excise duty changes on prices in the UK. Their findings suggest that for beer, spirits and petrol, changes in the specific tax are fully reflected in changes in prices.…”

mentioning

confidence: 99%

Estimating tax incidence, market power and market conduct: The European cigarette industry

Delipalla

O’Donnell

2001

International Journal of Industrial Organization

132

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Recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under-shifted onto consumers in the presence of imperfect competition. These results are used to derive a method of estimating market power and conduct. An application is made to the European cigarette industry. Previous empirical comparison of the price effects of ad valorem and specific taxes is limited. For a group of countries with broadly similar cigarette industries, there is evidence of undershifting of both taxes, with the specific tax having a significantly greater impact on price. The extremes of both perfect competition and monopoly can be rejected. Behaviour is no less competitive than the equivalent of Cournot. JEL Classification: H22, L13, L66

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“…He finds that an increase in indirect taxes was over-shifted. Baker and Brechling (1992) conducted analyses of tax pass-through for a number of consumption products, and they generally find the relation to be one-to-one.…”

Section: The Be Journal Of Economicmentioning

confidence: 99%

Competition and Welfare Effects of VAT Exemptions

et al. 2010

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istortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue. DOI AbstractDistortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue.

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The Impact of Excise Duty Changes on Retail Prices in the UK

Cited by 25 publications

References 6 publications

Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

Estimating tax incidence, market power and market conduct: The European cigarette industry

Competition and Welfare Effects of VAT Exemptions

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