The AlcoBev industry is facing a crisis due to the double whammy of high operational costs owing to runaway inflation and high taxation, coupled with negligible or no price revisions forthcoming in most States for the last 4-5 years. Amidst this crisis, there is a persistent request by sections of the AlcoBev industry to lower taxes for their products on the basis that their alcohol is mild or contains low ABV (alcohol by volume) and hence requires to be subject to lower taxation. This is sadly a misperception.
There is a general myth among many consumers that distilled spirits are ‘stronger’ than beer or wine regardless of the quantity consumed. But the reality is different. First of all, we need to understand that any alcohol is alcohol having the same chemical formulation. Beer, wines and spirits, all contain the same type of alcohol ingredient, called ethyl alcohol, which is responsible for the effects one feels regardless of what one is drinking. What is important is how much ethyl alcohol — the key alcoholic ingredient — a person is drinking, and how quickly.
Over 30 countries have moderate or low-risk drinking guidelines. Such guidelines make no distinction between the alcohol consumed as beer, wine or spirits; rather they reference the standard serving of alcohol or standard units. Standard serving sizes vary between different countries, but the most typical standard serving in India is defined as 12.8 ml of alcohol. Using the 12.8 ml definition of a standard serve, a 99 ml glass of wine at 13 per cent ABV, a 30 ml measure of spirits at 42.8 per cent ABV or a 257 ml glass of beer at 5 per cent ABV, all contain the same amount of alcohol. So what matters is how much of alcohol is consumed and not what type of alcohol is consumed.
A standard drink of one beverage should be compared to the standard drink of another; no type of alcohol is ‘safer’ than the other.
Any taxation of alcoholic beverages should be proportionate, appropriate for each local context, and consistent with World Trade Organization principles. Taxation should neither create market distortions nor exacerbate issues of harmful consumption. The November 2022 report from the Washington-based International Tax and Investment Center (ITIC) suggests that high taxes on alcoholic beverages can divert consumers to the illicit alcohol market, which poses a major threat to public health and finances.
In alignment with the OECD’s Illicit Trade in High-Risk Sectors report, the research showed that a significant price difference between licit and illicit alcoholic beverages is one of the biggest drivers of the illicit trade; if consumers struggle to afford legal alcoholic beverages, they will turn to cheaper, illicit ones that can be potentially lethal.
The writer is CEO, International Spirits and Wines Association of India