American Univesity of Beirut

Taxation and harmful alcohol consumption by Dr. Ali Chalak

Over the past couple of years, taxes in Lebanon have been increasing without proper consideration for their possible repercussions on citizens’ livelihoods, not least their health. In his latest research, Dr. Ali Chalak, associate professor at the Department of Agriculture, has been exploring the potential to use taxation as an economic tool to reduce the harmful effects of alcohol consumption among the youth demographic. He explains that agricultural economic tools have been useful for this purpose. Indeed agricultural economics is a field that explores food and beverage commodity markets among other things, and as such is at the core of the wider umbrella of what is now increasingly termed ‘applied e​conomics’. As such, it has afforded him a practical array of tools to research taxation and alcohol taxation.

Dr. Chalak’s work is conducted as part of a wider interdisciplinary research project funded by the International Development Research Centre (IDRC), in which he worked closely with Principal Investigator (PI) Dr. Lilian Ghandour Abiad and other colleagues from the Faculty of Health & Sciences (FHS). He observes that the alcohol drinking culture among youth has assumed increasingly westernized patterns, as it is evolving into a group-oriented behavior often characterized by harmful drinking patterns. The latter is actively promoted by aggressive leisure, marketing and advertising industries. With past consumption patterns, that were more individual and celebratory in nature, being gradually eroded, harmful alcohol consumption is on the rise, all the more so among demographics that were hitherto impervious to it such as women and youth. 

Dr. Chalak’s research administered a survey to approximately a 1000 student respondents studying at eight major Lebanese universities as an effective means to target youth. Dr. Chalak explained that the research relied on stated preference methods allowing respondents to register their intention to choose from a set of hypothetical products with attributes that, most notably, can be experimentally varied. This enabled him to examine the response of youth to increased taxation on five alcoholic beverage categories: beer, wine, spirits, Arak, and vodka-mixes and alcopops. Dr. Chalak indicates that vodka-mixes included in this study contain a relatively high ethanol content (around 10%), and are generally consumed by individuals from lower socio-economic status as they are cheaper and more readily available in small shops along major roads and highways in various parts of Lebanon. 

This method allowed Dr. Chalak to explore the demand elasticity for each alcohol beverage type, and in turn used those in order to simulate the effect of various tax scenarios on total ethanol intake. Two main scenarios were therefore explored. First, a broad-based taxation scenario subjected all five drink categories to a flat tax increase of 20%, relatively limited, yet deemed sufficient to achieve public health goals. For example, such a tax would increase a typical beer bottle’s price from 1,000 LBP to 1,200 LBP. The second scenario imposed a selective 20% tax increase only on beverages with high alcohol content; namely Arak (typically 50%) and spirits (typically 40%), while leaving the other three categories that have lower alcohol contents intact. This was done with the consideration that beer and vodka-mixes are mainly consumed by young individuals with limited income or cash (as capped by their allowances), and such a selective tax may not be as financially burdensome to them as the broad-based scenario. 

Interesting outcomes were revealed. Even though, on paper, the first broad taxation scheme approach is more likely to decrease alcohol consumption, the second scenario actually reduced overall consumption of ethanol drinks by slightly more than the first. Dr. Chalak points out that this provides a possibility to spare young or limited-income individuals from paying higher prices for cheaper beverages (beer, wine, vodka-mixes), all the while achieving the same reduction in alcohol consumption as the broad taxation scenario. He adds that this selective tax scheme would be more practical to administer from a public health perspective. Consequently, Dr. Chalak explains that this study can provide policy-makers with better public policy guidelines to be addressed by the Ministry of Finance. Keeping in mind local alcohol production, beer and Arak can be exempt from these taxes as they are, at least in part, produced locally, not to mention the fact that Arak is considered part of Lebanon’s cultural heritage. 

In general, this kind of research helps in understanding and implementing taxation that does not harm limited income individuals and at the same time reduces harmful alcohol consumption, particularly among youth. Dr. Chalak concludes: “The economic tools used by health economics and agricultural economics in the field of applied sciences, like those employed in this research, are quite similar and present a great potential for growth and synergy”.

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