Why Liquor Duties Were Raised By 25%
01 Mar 2014OUR liquor duties are aimed at moderating the consumption of alcohol, given the social costs associated with excessive drinking ("Puzzled by hefty rise in alcohol tax" by Mr Trent Ng Yong En; Tuesday). The duties have to be adjusted from time to time to ensure that their effectiveness is preserved.
The last effective liquor duties hike was in 2004. The increase of 25 per cent announced in Budget 2014 broadly reverses the decline in the effectiveness of the duties over the past 10 years, as incomes and purchasing power have increased while the liquor duties have remained largely unchanged.
Excessive drinking remains a problem and more young people are drinking. The incidence of alcohol-related diseases such as liver cirrhosis has also increased over the last decade.
The increase in duties also complements our broader efforts to curb the drinking habit through public education efforts starting in schools and our liquor licensing regime.
Mr Ng also asked why the duties hike was larger for liquor (25 per cent) than for tobacco (10 per cent).
Tobacco duties make up a higher proportion of the price of cigarettes, compared to alcohol. Hence, the 10 per cent increase in tobacco duties will raise the retail price of cigarette packs by about 5 per cent to 8 per cent, similar to the impact of the increase in liquor duties on liquor prices.
We are also mindful of the increased risk of contraband cigarettes if the duties are too high. The duties are once again part of the broader effort to discourage smoking, such as through restrictions on the places where smoking is allowed and on advertisements and display of cigarettes, and through education.
We thank Mr Ng for his views and assure him that adjustments in duties will continue to be carefully considered.
Lim Bee Khim (Ms)
Director, Corporate Communications
Ministry of Finance