Confused sin tax.

The concept of sin is not bandied about too often in our post-religious age, but "sin taxes" are more popular than ever with inquisitorial governments eager to battle bad lifestyles. An intriguing and strongly argued study released in November by the University of Victoria's Centre for Addictions Research of B.C. offers a new approach to the question of whether our sin taxes on alcohol are doing very much to inculcate the intended virtues. In Canada, liquor taxation is a quilt of incentives stitched together poorly by overlapping levels of government. They are broadly meant to discourage drinking, but in some cases they may simply serve to make some kinds of drinking more attractive than others.

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Consider the way a can of beer is taxed. If it contains more than 2.5 per cent alcohol, the federal government hits it with a flat levy of about $28 per 100 litres of overall beverage volume. Right off the bat, this means that a stronger beer will be taxed less per unit of alcohol than a lighter one, and that difference is intensified when the same provincial sales taxes are applied to the can of the weak beer and the strong. What's even stranger, from a public health standpoint, is that a 6.8 per cent wine cooler over on the next shelf is federally taxed at only $24.59 per 100 litres. No incentive has been supplied for the customer to prefer a weaker product, and as a result there are few lagers below 4 per cent on Canadian shelves.

In Australia, where lighter beers got a proportionate tax break beginning in 2002, markets have adapted to the new incentives by offering a broader variety of beers in a wider array of strengths, and while beer drinkers are consuming as many beers as before, they appear, on early evidence, to be consuming less alcohol. CARBC doesn't say so, but the slight tax advantage that wine coolers and other "alcopops" enjoy is anomalous, considering their popularity among young people. Does it make sense to positively encourage teenagers to prefer a drink already more like soda pop?

"The overall effect of Canadian alcohol taxes," the study concludes after making a survey of taxes and (outside Alberta) monopoly-retailer markups, "is to give the greatest advantage to alcoholic drinks with the most alcohol content." This is not how the system was planned: it is simply an artifact of the provinces choosing to impose sales taxes on the overall wholesale beverage price, rather than the alcohol in the beverage, along with a federal excise system based on general beverage type, rather than strength. If we started from scratch, with public health instead of government revenue maximization in mind, it's unlikely we'd devise a system where the taxes and retail markup on cooking sherry are one-third what they are for a more peaceable glass of shiraz--or that we would impose the same net tax and markup on a can of Kokanee that we do on a bottled Caesar that has 50 per cent more alcohol.